vinay cements ltd Management discussions

VINAY CEMENTS LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS Financial Performance: The summarized financial results for the year ended 31st March, 2011 are as follows:- (Rs. in Lacs) Particulars Year Ended Year Ended 31.03.2011 31.03.2010 Sales 2254.48 4262.71 Less:- Excise Duty 200.02 325.14 Net Sales 2054.46 3937.57 Other Income 28.74 1.97 Total Income 2083.20 3939.54 Profit Before Interest, Depreciation, Tax and Prior Period Items (215.60) 377.83 Interest and Other Financial Charges 169.96 116.84 Depreciation and Amortization 318.92 234.73 Profit / (Loss) before tax and Prior Period Items (704.48) 26.26 Prior Period Items (866.26) (18.71) Profit / (Loss) before tax (1570.74) 7.55 Current Tax - (1.50) Income Taxes for earlier years 21.59 - Deferred Tax Credit 126.36 63.29 Profit / (Loss) after tax (1422.79) 69.34 Industry and outlook: Over the past 5 years, from 2004-05 to 2009-10, demand for cement has grown at a CAGR of 10.3 per cent. Going ahead too, it is expected that the estimated demand for cement to grow at a robust CAGR of around 10 per cent between 2009-10 and 2014-15 led by infrastructure spending, particularly in the urban areas, and independent housing. It is also expected that the demand for cement in the eastern region to grow at a CAGR of around 12.3 per cent between 2009-14 and 2014-15, as compared to a growth of 10.4 per cent between 2004-05 and 2009-10. The growth in demand is expected to be primarily driven by the housing sector, infrastructure projects and industrial investments. Demand in the eastern region is expected to be driven by various industrial projects that are being implemented in the mineral resource-rich states such as Orissa, Jharkhand and Chattisgarh, as well as housing projects in the rural and semi-urban regions, particularly in Bihar and West Bengal. Additionally, infrastructure projects like power and various road projects will provide further impetus to demand for cement in this region. The cement industry has witnessed capacity additions to the tune of around 95 million tones over the past 5 years, from 2006-07 and 2009-10. Going forward, it is expected around 117 million tones of cement capacities to be added from 2010-11 to 2014-15. With almost 60 per cent of these capacity additions are expected to come on-stream in 2010-11 and 2010-12 itself, it is expected that the maximum effect of capacity additions to be witnessed over the next 2 years. Consequently, it is also expected that the operating rates to follow a declining trajectory and subsequently bottom out in the year 2011-12. However, with the supply additions moderating from 2012-13 onwards, operating rates are expected to recover to around 90 per cent by 2014-15. Cement prices declined by 2 - 3 per cent in 2010-11, which translates to a fall of Rs. 6-10 per bag of cement. However, it is expected that the cement prices to register a marginal increase of Rs. 5 - 10, translating into a 3 - 4 per cent y-o-y growth. Market: The demand growth for cement shall be gaining strong momentum in the north east sector owing to huge housing and infrastructure projects. Upcoming industrial investments, housing and infrastructural developments is going to drive the demand for cement to new heights. Among all the states of the North east, Assam is the highest growing state and is consuming the highest amount of cement. We are hopeful to achieve increasing market share in profitable region within north-east by focusing on retail segment. Internal Control System: In order to facilitate better decision making in the organization, new SAP supported Enterprise Resource Planning (ERP) has been introduced and fully operationalized by the Management. On-line availability and reliability of the Information is also ensured by the new system. Quality Initiatives, Environment, Occupational Health & Safety: The Company is committed to the highest standards of quality for its products, processes and systems. The Company is also committed to the highest standards of Environment Management and Occupational Health & Safety Management. Human Resources: HR practices of your company aims to enhance the capability of the organization through creating performance and result driven culture, employee value proposition and supporting operations through effective systems and processes. The company continued to invest in creating progressive human resources practices to create value for our customers, stakeholders and investors. Company also recently launched new organization structure, new HR policies, Performance management system, and competency framework. Hence your Company is creating engaged employees who are highly productive, create customer satisfaction and loyalty, and drive business results. Corporate Social Responsibility: Your Company firmly believes and is fully committed to charity and its social responsibilities, and arranged free health and medical check-up program for the community, plantation and green belt development, immunization and pulse polio program etc.