pioneer magnesia works ltd Management discussions

THE PIONEER MAGNESIA WORKS LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS Operations i) Production this year was 5895 MT, which was 18% less than the previous years 7166 MT. The companys sale of magnesium chloride was 5807 MT which also was lower by 18% than the previous years 7038 MT. ii) Export during the previous year was 460 MT. This years direct exports were 280 MT and through export houses Nil. The reason for this was that every year the company was exporting to Iran through an export house, but this year Iran is not buying from India for political reasons. iii) Everywhere else, China has taken over the magnesia market with much cheaper material and low ocean freight. The expected break through has not come. iv) During the year, production of naturally occurring crystals was phenomenal. It is estimated that anywhere between 4000 to 6000 tonnes was produced in the Little Rann area. Being much cheaper, this has had an adverse effect on manufactured magnesia. Offtake of the latter and more expensive magnesia was noticeably reduced due to this factor. During the current year, however due to early pre-monsoon showers, production of naturally occurring crystals has come to an end. Its production is less than half of the previous years. Perhaps, this will help in the sale of manufactured magnesia during the year 2006-07. v) At the beginning of the year there were rumors that the finance ministry was considering levying central excise duty from the beginning, instead of waiting for the Rs.1 crore holiday. This could have been excellent for PMW, because, all its competitors would have had to pay central excise. Unfortunately this never happened and, as usual, PMW was the only central excise payer out of all other manufacturers of magnesia in India. This is truly a major set back, year after year. It is very unfair. vi) OBD operations were closed down. Most of the equipment was sold and the remaining absorbed into the main company. Future Plans Looking at the over all picture, your company has not formulated any plans for the future. Industrial Relation Cordial relations between workers and management continue to exist. The company does not have any employees whose particulars are to be disclosed under the provisions of section 217(2A) of the Companies Act, 1956, read with Companys (particulars of employees) rules, 1975.