rathi ispat ltd Management discussions

RATHI ISPAT LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS A. PLANT PERFORMANCE: The sales of the Company during the financial year ended 31stMarch 2007 aggregate to Rs.323.45 Crores which has declined by 25% approximately as compared to the previous year. The production of the Company has declined approximately by 23% in SS Billets, in SS Flats is down by 20% and in Steel casting by 47% approximately resulting in under recovery of the overheads. On sales front SS flats has declined by 18% in value resulting in reduction our market share significantly due to which the company could not able fetch better sales price. Sales of steel casting which is high margin product have declined by 19% in value due to the lower production. During the year under review, the company incurred huge loses mainly on inferior quality of raw material, non availability of raw material at economical price. Since, most of the vendors were exporting the raw materials; there was unexpected rise in raw material price. The average purchase price of raw material has increased by 23% which could not be passed to the consumers and average sales price of our finished goods was also reduced by 2% as compared to previous year. The Company also tried to change its product mix by developing the new grade of Stainless steel. However, due to the poor quality of raw material the company could not dent the market with its new product since the quality of new product did not match the expectations of the market. B. OPPORTUNITIES AND THREATS: The Stainless Steel has wider application in the form of utensils as well as crockery, cutlery. It is further used in making consumer durables like Kitchen sinks, bath tubs and home appliances like toasters, mixer-grinders, refrigerators washing machines, etc in piping in process plants, chemicals plants and refineries including gas industries pipelines, pollution control equipments, in food processing industries because of superior hygienic properties, in architectural & structural applications, ladders, ventilation louvers, fire walls cable trays, module cladding, door & window frames, in roofing materials, in public transport viz. Railway, Cars and Passenger buses, in decorative applications and in Nuclear industry. Demand for stainless steel is increasing rapidly. The finished Products being manufactured by the company are industrial commodity products which are susceptible to price volatility. Further, the change in Government policies relating to export adversely affects the companys profits. Due to export of Ferro alloys to the other countries, all the producers of the steel , except those having mining rights, are facing problems to procure its raw material at economical price. C. INTERNAL CONTROL SYSTEM The Company has a well defined internal Control system that is adequate and Commensurate with size and nature of business. Clear roles, responsibilities and authorities, coupled with internal information Systems, and ensure appropriate information flow to facilitate effective monitoring. Adequate Controls are established to achieve efficiency in operations, optimum utilization of resources and effective monitoring thereof and compliance with applicable laws and these are being regularly reviewed by our Internal Auditors and Statutory Auditors of the Company. The Audit Committee of your Board met four times during the year. It reviewed the adequacy and effectiveness of the internal Control and monitored implementation of Internal Audit function. D. HUMAN RESOURCES Your Organisation possesses a pool of talented employees where all the individuals are committed towards the sustained growth of the company. Your management enjoys a high degree of participation and confidence of all the employees towards the betterment of the organisation. Information in accordance with the provisions of section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rule, 1975 as amended, there is no employee employed by the Company either for whole or part of the year drawing remuneration in excess of the limits laid down under the rules mentioned above. RESEARCH AND DEVELOPMENT EXPENDITURE The Company carried out in house research for value added products targeted the best realisation as per pertaining market rates. During the year, due care was taken to produce the value added quality product by means of our technical know how and as per market requirement. The Chemistry was aimed to manufacture the high valued item which could give the best performance as per market requirement. The Chemistry was aimed for spinning and cutlery items which could give best realizations out of this product. The Chemistry was meant for excellent corrosion resistance, uninterrupted heat resistance & minimum loss during buffing. With the above factors in view, the R & D was carried out and, with the passage of time various changes in the chemistry mode were incorporated. The factors effecting the corrosion properties was chromium only. During our R & D, we have taken care of vital elements like Copper and Nitrogen addition also which could avoid the delayed cracking tendency of the material. The R & D practices with certain changes was again carried out with a motive to achieve value added product as well as product mix ,which could be largely utilised in cutlery and kitchen wares. R & D was mainly aimed to induce high toughness during pressing of the material. The manganese (Mn) was the prime element which could enhance the toughness of the material with the set percentage of Mn the R & D was carried out. At the end, The Company arrived at conclusion that certain level of burning loss can be reduced with the introduction of some elements in production. ENVIRONMENT SAFETY: Your Company has installed proper water and air treatment plants to fulfill its obligations towards environmental safety. The Company has also obtained required applicable permissions from Pollution Control authorities. Your Company has obtained ISO 14001:2004 certificate during the year 2006-2007.