Industry Structure and Development
The all India cement production during the period April 2013 to March 2014 registered acumulative growth of around 3 percent as against around 6 percent during the correspondingperiod of last year. The cumulative growth for the eight core industries (coal, crude oil,natural gas, refinery products, fertilisers, steel cement & electricity) remained sameas previous year, at around 3 percent. The increase in capacity in Gujarat and Rajasthanduring the last two years is around 22 percent and the surplus capacity, coupled withlower exports resulted in tough competition and is putting pressure on the sustainedprofitability of cement companies in Gujarat. There were a few new entrants in the cementproducers, resulting in competitive pressures in the already fragmented market, in Gujaratas well as Rajasthan.
With the stable political scenario and the sustained development strategies the need ofinfrastructure facilities and the housing needs of the population will enhance theconsumption of cement further in the country. The long-term future of the cement industryis optimistic and positive. However, due to addition of new plants with large capacities,the capacity utilization would continue to be low. In the state of Gujarat, there islikely to be a large surplus of capacity over demand for the near future, which may affectthe stability of cement prices. A large part of production therefore will need to beexported or transported to longer distances, in other states like Maharashtra, Karnatakaand Kerala.
Opportunities & Threats
The decline in cement consumption in the state of Gujarat is likely to be reversed andis expected to give opportunities for growth in the cement industry.
Substantial increase in the prices of diesel and other petroleum products has adverselyaffected the raw material cost and cost of delivery. The rail freight continued to be highand the transportation by rail remains uneconomic. The additional restrictions imposed inbuying of power from the energy exchange under Open Access are likely to increase the costof power and the manufacturing cost of cement. The infrastructural constraints and highcost of handling of cement at public ports continue and Railway sidings continue to putpressure on the cost of delivery of cement.
Although, Gujarat state is likely to continue to be surplus in cement production, theCompany can access coastal markets economically being close to the sea.
Segment Review and Analysis
During the year, the Company has produced and sold mainly cement of different varietieslike Ordinary Portland Cement (OPC) and Portland Pozzolana Cement (PPC). The Company alsosold clinker, which is intermediate product for the manufacture of cement. The bulk of therevenue and profitability comes from the sale of cement.
Risks and Concerns
Over capacity of cement versus the demand coupled with slow down in the export ofcement is leading to tough market conditions and high levels of volatility in theprofitability of cement business. The cost escalation of inputs likes diesel, fuel, poweretc. and the high rates of government levies (excise, sales tax, octroi, local body taxand other miscellaneous levies) continue to be a major concern for our Company. The delayin getting the required mining lease for the additional mining areas is a great concern asthe availability of good quality limestone has substantially reduced in the existinglimestone mines.
Absence of railway siding and a port near the factory results in increase in cost oftransportation to farther markets of Gujarat as well as the markets outside Gujarat. TheCompany proposes to set up a captive jetty to mitigate the risk.
Internal Control systems and their adequacy
Your Company has adequate internal control system and procedures commensurate with thesize of its operation and nature of its business. The independent Internal Auditorscontinuously reviews the adequacy and effectiveness of the Internal Control systems on theon-going operations of the Company, which provides reasonable assurance of adequacy andeffectiveness, control, governance and risk management procedures to the Audit Committee.The recommendations of the Internal Auditors and the Audit Committee are followed upeffectively for implementation. Following objectives of the Internal Audit is forming partof the audit plan as approved by the Audit Committee.
Adherence to the operating system and manual.
Performance of operating activities in efficient and effective manner.
Compliance with the risk management procedures.
Compliance with the legislative and regulatory provisions.
The Audit Committee reviews the audit reports and also hold discussions with theStatutory Auditors.
Human Resource Development / Industrial Relations
Company believes that its Human Resource is the most important resource and continuesto work for its development. The Company continues to invest in upgrading the knowledgeand skills of the employees. The Company is providing growth opportunities to internaltalent by assigning them with higher responsibilities along with suitable exposure.
In view of people development as a key focus, the Company continues to take newinitiatives to further align its HR policies to meet the growing needs of its business.
We have embarked up on employee engagement as a tool to create conducive workingenvironment that will facilitate employee commitment. The Industrial relations at theplant were cordial.
The Management places on record the contribution of employees at all levels during theyear and their whole-hearted co-operation, which has resulted in improved results.
Corporate Social Responsibility Health Care
GSCL plant has a health care center providing medical aid to the Companysemployees and the family members, workers as well as patients from the near by areas. TheCompany conducts various Immunization programmes, family welfare education, health care,safety as well as various periodical health check up and first aid training programmes foremployees and workers.
The Companys plant has a full-fledged secondary school for the children of theemployees and local people staying in nearby areas. In order to enable the childrenstudying in English medium schools or Colleges in Veraval and nearby areas, the Companyprovides school bus facility.
The Company is committed to the protection of environment and maintenance of biodiversity. A green belt has been developed in the plant and nearby areas. Many saplingswere planted at various places in the plant and mines area. The plant has also carried outrain water harvesting and this has increased ground water resources besides providinggreenery.
Statements in this report on Managements Discussion and Analysis describing theCompanys objectives, projections, estimates, expectations or predictions may beforward looking statements within the meaning of applicable security laws and regulations.The Statements are based on certain assumptions and expectation of future events. Actualresults could however differ from those expressed or implied. Important factors that couldmake a difference to the Companys operations include global and domestic demandsupply position, raw material, fuel, transport cost and availability, changes inGovernment regulations and tax structure, economic development in India.
The Company assumes no responsibility in respect of forward-looking statements, whichmay be amended or modified in future on the basis of subsequent developments, informationor events.
|On behalf of the Board of Directors|
|Place : Mumbai||M.S.Gilotra||Jay Mehta|
|Dated : May 31, 2014||Managing Director||Executive Vice Chairman|
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M N Mehta , Chairman
Jay M Mehta , Executive Vice Chairman
Sanat M Mehta , Nominee
M S Gilotra , Managing Director
Company Head Office / Quarters:
Off Veraval-Kodinar Highway,
Phone : Gujarat-91-2876-308200 / Gujarat-
Fax : Gujarat-91-2876-286540 / Gujarat-
E-mail : email@example.com
Web : http://www.mehtagroup.com