udayagiri rubber company ltd Management discussions

THE UDAYAGIRI RUBBER COMPANY LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS Financial results The Company reported a net loss of Rs.33,41,716 for 2006-07 compared to a net loss of Rs.33,94,093 in the previous year taking its accumulated losses to Rs.2,39,36,856. The financial position of The Udayagiri Rubber Company Limited like the other companies in the tea plantation sector, particularly in South India, continued to worsen the despite a marginal improvement in average realisations to Rs.52 per kilogram in 2006-07 (Rs.43 per kilogram in the previous year) which continued to be substantially less than even the estate-level cost of production of Rs.72 per kilogram (Rs.64 per kilogram in the previous year).The Companys estate is organic certified and the Company is actively considering branding and retailing the tea as organic certified. The company is planning to venture out on organic dairy farming with active involvement of the estate workers. The management feels The Company is also actively considering options to increase the productivity per acre and reducing the cost of production per kilogram. The summarised results of the Company for the year are given below: 2006-07 2005-06 Rs. Rs. Sales and other income 23,28,126 21,48,727 Loss before taxation (33,29,462) (33,88,594) Fringe benefit tax (12,254) (5,499) Loss after taxation (33,41,716) (33,94,093) Non recurring and exceptional items: Provision for group gratuity premium reversed since no longer required - 1,11,532 (33,41,716) (32,82,561) Appropriation: Loss brought forward (2,05,95,140) (1,73,12.579) Loss carried forward (2,39,36,856) (2,05,95,40) The Company has not been successful as yet in selling any substantial part of the Ashley Estate. With continued losses on operations, the Company was finding it difficult to repay its Term loan and the Overdraft, the company convened an EGM on 12 April 2007 to authorize the sale of thirty acres of land in Ashley Estate to Directors and their relatives. The resolution was passed unanimously at the EGM. Advances aggregating Rs.91,92,276 at March 31, 2007 have been received from The Thamarapally Rubber Company Limited, a group company, towards purchase of land, which was authorized by the shareholders at the Annual General Meeting held on September 30, 2003. The Udayagiri Rubber Company Limited continues to actively search for buyers for substantial areas or even the whole of Ashley Estate to settle overdue liabilities and for the purpose of restructuring the companys business.