Ellenbarrie Industrial Gases Ltd

BSE: 590087 | NSE:  | ISIN: INE236E01014 
Market Cap: [Rs.Cr.] 376.63 | Face Value: [Rs.] 10
Industry: Chemicals

Management Discussions
MANAGEMENT DISCUSSION AND ANALYSIS

The Management of Ellenbarrie Industrial Gases Ltd. (EIGL) presents its analysiscovering performance and forward looking statements based on certain assumptions andexpectations of future event with a view to convey the management's perspective on thefinancial condition and operating performance at the end of the financial year 2013-14:

I. Economic Overview & Outlook:

India's GDP growth has slowed down to 5% in 2013 on the face of rising inflation andtight monetary controls. This has led to weak domestic demand, for manufacturing products.Going forward Indian economy is widely expected to grow at 5%. Steel Sector which recorded3.3% growth during the 2013 - 14 is expected to keep similar momentum in 2014-15.Automotive sector which recorded - 6% (negative) growth during 2013-14 is expected toachieve 3-4% growth next year, Similarly, construction industry is expected to grow at 5%as against 1.9% during 2013-14.

II. Operation and Sales Performance:

Financial Year 2013-2014

Financial Year 2012-2013

%lncrease/(Decrease)

Products Units Production Sales Production Sales Production Sales
Oxygen cu.m 1,94,92,831 1,93,64,316 2,44,34,162 2,08,98,993 (20.2) (7.3)
Nitrogen cu.m 2,91,01,638 2,88,95,621 2,84,91,011 2,60,87,513 2.1 10.8
Argon cu.m 4,09,425 4,07,203 7,87,973 6,35,486 (48.0) (35.9)
Acetylene cu.m 91,248 91,220 94,179 84,045 (3.1) 8.5
Medical Oxygen kg. 32,07,428 32,00,680 23,11,666 23,40,306 38.7 36.8
Carbon-di-Oxide cu.m 11,23,788 11,29,220 12,53,414 12,24,325 (10.3) (7.8)
Gas Mixture cu.m 1,86,904 1,84,269 73,216.08 94,936 155.3 94.1

The economic downturn and the associated steel and other industrial sector underperformance had predictable effect on the operations of your company. Your Company tookthis opportunity to consolidate its customer base and optimize its cost base. Positiveoutcomes of these actions are likely to follow in the forth-coming quarters.

Considering the sluggish industrial activities in Eastern & Southern India yourcompany has had focused on valued added products so as to partially compensate losingvolumes in major products.

III. Financial Performance:

EIGL recorded negative PBT of Rs. 2781 lacs during Financial Year 2013-14 (previousyear profit Rs. 56 lacs) breaking the continuing trend of profitablility of more than 10years mainly owing to twin effects of lowering activities and sharply increased financecost. The analysis of major items of the financial statement is discussed as under:

a) Net Sales & other Operating Income :

(Rs. lacs)

Financial Year Financial Year Change
2013-2014 2012-2013 %
Income
Revenue from Operations 6,786 7,938 (15%)
Other Income 237 139 71%
Total Revenue 7,023 8,077 (13%)

Sales volumes were sharply lower during the year mainly for Oxygen and Argon, partiallycompensated by rising volumes for Nitrogen and medical oxygen. Other operating Incomeregistered increase of 71% owing to interest on fixed deposit with banks marked as MarginMoney and increase in profit on sale of fixed assets.

b) Expenses:

Financial Year 2013-2014 Financial Year 2012-2013 Change

%

Expenses
Cost of Materials Consumed 306 466 (34%)
Material Purchased for Trading 953 1,521 (37%)
Changes in Inventories of
Stock-in-Trade 32 (78) (141%)
Employee Benefits Expense 516 442 17%
Finance Costs 2,939 1,004 193%
Depreciation and Amortization
Expense 747 753 (1%)
Other Expenses 4,312 3,914 10%
Total Expenses 9,804 8,020 22%

Materials consumed were lower because of reduced activity, change in product mix andreduced dependence on bought - in products.

Trading materials purchased reduced due to sharp reduction in trading volumes.

Employee Benefit Expenses registered increase mainly owing to hiring of high skilledmanpower to address future growth needs.

Finance Cost increased sharply with recognition of exchange fluctuation on retirementof foreign currency borrowings and sharp depreciation of Indian Rupee versus US Dollar.

Other Expenses have increased mainly because of more than 20% increase in pwoer tariffin both Eastern and Southern regions where EIGL have operations.

IV. Strategy, Risks, Opportunities & Threats :

Air Water Inc. has acquired majority holding of the company during the year. EIGL'sreinforced strategy is to continue building capacities by being competitive and to deliverproducts of international standards. To this end EIGL stresses on better understanding ofcustomer needs, optimize its cost structure and strengthen its performance.

EIGL is exposed to following risk factors with possible mitigating strategies :

Macroeconomic environment of India and industrial cycles such as regional demand supplyimbalances, price swings and input cost variations. This can be addressed through timelyreadjustment of customer base, product profile and cost structure.

Growth projects - EIGL is currently installing an air separation plant in Hyderabad toaddress the needs of that region. The project is exposed to risks like time and cost andregulatory approvals.

Regulatory Environment - The Company is subject to several regulatory scrutinies instates it is present. The company has policies, systems and procedures in place to ensurecompliances.

Financing - Industrial gas business requires substantial investment being a capitalintensive business; the company has raised borrowings in foreign currency which is subjectto fluctuations. It is important to note that with Air Water Inc. being a majorityshareholder has added to company's strength to address its funding needs. The companymanagement has put in place a risk management policy to respond to volatility in foreigncurrencies.

V. Cautionary Statement:

Statements made in this report describing the Company's objectives, projections,estimates, expectations may be "forward-looking statements" within the meaningof applicable laws and regulations. Actual results could differ materially from thoseexpressed or implied.

   
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Key Information

Key Executives:

Shanti Prasad Agarwala , Managing Director

Padam Kumar Agarwala , Joint Managing Director

Varun Agarwal , Executive Director

Manaskumar Dutta , Director


Company Head Office / Quarters:

3A Ripon Street,
,
Kolkata,
West Bengal-700016
Phone : West Bengal-91-033-22491922/22291923/22292441 / West Bengal-
Fax : West Bengal-91-033-22493396 / West Bengal-
E-mail : ellenbarrie@vsnl.com
Web : http://www.ellanbarrie.com

Registrars:

ABS Consultant Pvt Ltd
99 Stephen House ,6th Floor ,4 B B D Bag(E) ,Kolkata-700002

 
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