Aarti Surfactants Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economy

Amid a turbulent socio-political and economic landscape, the world economy showcased impressive resilience in CY 2024, with a 3.3% growth rate. The growth was supported by downward inflation trends. Inflation declined from 6.6% in CY 2023 to 5.7% in CY 2024, largely as a consequence of falling energy prices and stringent monetary policies that have been implemented by most countries. Growth remained divergent across regions. The US economy on the back of strong underlying demand and a strong labour market exhibited steady growth. Conversely, economies in the eurozone such as Germany navigated consumption slowdown. The economy of China navigated issues in its property sector and witnessed a weaker than expected growth.

The global economy is forecasted to witness a moderate growth 2.8% in CY 2025 and 3% in CY 2026. It is expected that advanced economies will reach their inflation targets faster than developing economies. Inflation expected to be at 4.3% on average in CY 2025. With the recent imposition of tariffs by the US government and rising protectionist policies in various regions, the stability of global trade continues to be threatened. Despite these challenges, businesses are exploring new markets to bolster their supply chains, which is providing developing markets with opportunities. With supportive policy frameworks and technological innovation, the global economy is well-positioned to navigate challenges and capitalise on emerging opportunities.

Indian Economy

In FY 2025, the economy of India recorded a growth of 6.5%. 1 Despite a volatile economic landscape the nation retained its position as one of the fastest growing economies in the world. This growth was facilitated by robust performance across sectors, such as services, manufacturing and the agriculture. Rural demand remained robust, while urban demand moderated during the year under review. The headline CPI inflation averaged 4.6%, remaining within the Reserve Bank Of India (RBI) target range and enabling a follow-up 100 basis-point reduction in the repo rate till June 2025, to 5.5%. Moreover, the total FDI received by India was USD 67.7 billion, increasing from USD 60.2 billion in FY 2024. Additionally, the chemical industry in India was allowed 100% FDI under the automative route. This played a critical role in supporting the growth and development.

The outlook for the economy of India remains optimistic. The nation is projected to sustain the growth momentum at 6.5% for FY 2025-26 This is expected to be supported by strong domestic and foreign investments, expanding manufacturing activity and growth in trade and financial services. The governments sustained emphasis on capital expenditure, rising rural demand and the rapid development of both digital and physical infrastructure are likely to further drive economic progress. The growth in Indias manufacturing infrastructure is likely to position it as a global manufacturing hub.

Growth in FDI inflow (USD in billion)

.2 .7 detergents and industrial cleaning applications. The Asia-Pacific region emerged as the fastest-growing market for surfactants facilitated by expedited industrialisation, urbanisation and escalating disposable incomes. The global surfactant industry remains intensely competitive, propelling innovation in technology and evolution of the regulatory landscape.

The global surfactant industry is envisioned to grow in the coming years at a CAGR of 5.3% from 2024 to 2030.Further, rising urbanisation in the Asia Pacific region will promote the adoption of eco-friendly and sustainable products within the global industry. The growth will be further bolstered by the growing adoption of e-commerce and urbanisation.

Growth in the global Surfactant industry 3

INDUSTRY OVERVIEW

Industry Global Surfactants Industry

Surfactants are chemical agents that reduce surface tension between two substances, most commonly between a liquid and a solid or between two liquids. These compounds are extensively utilised in detergents, soaps, emulsifiers, foaming agents and dispersants, agriculture, pharmaceuticals and industrial processes. The global industry experienced notable growth during the period under review, buoyed by heightened consumer awareness of hygiene and transmission of illnesses and diseases through contaminated surfaces. Demand from the personal care and cosmetics industry further contributed to the upward trend.

In CY 2024, the global surfactant industry was valued at USD 39.5 billion. 2 Regionally, North America exhibited a strong growth trajectory. This growth was spurred by heightened demand across personal care, household

Indian Surfactants Industry

The Indian surfactant industry exhibited dynamic growth during the year under review. This growth was catalysed by escalating demand across a broad spectrum of applications encompassing including personal care, household cleaning and industrial processes. Among these, rapid growth in the personal care and cosmetics sector greatly propelled the overall growth in the industry.

Amid heightened competition, key industry players shifted their focus towards product innovation and enhancement of their production capabilities. A visible transition towards eco-friendly surfactants in the industry was noticed during the reporting period. This shift was supported by rising environmental awareness as well as the stringent regulatory landscape on chemical usage. In addition, the R&D activities within the industry drove the innovation and development of various products that meet the specific needs of the consumers.

In the years ahead, the Indian Surfactants industry is envisioned to sustain its growth trajectory and attain a market size of USD 10.92 billion by 2035. 4 The growth of the Indian industry is expected to be driven by rising domestic consumption and strong export potential. In addition, the increasing demand for high-performance and environmentally friendly surfactant formulations is likely to further support the expansion of the Indian surfactants sector.

Industry-specific growth trends

Home Care Industry

The home and laundry care industry in India is dynamic and swiftly evolving. The industry is projected to grow at an estimated CAGR of 6.2% from 2025-2030. 5 This growth is expected to be facilitated by growing purchasing power, the expanding footprint of modern retail formats and e-commerce. Although the traditional local grocers had significant contribution in the industrys growth, the rise in supermarkets, hypermarkets and e-commerce platforms have revolutionised the sale of home and laundry products. Along with this, product innovation and product differentiation remained key trends shaping the Indian home and laundry care industry.

Hair Care Industry

The Indian haircare industry remains notably fragmented. The growth in the industry is shaped by the presence of a diverse mix of global and domestic players. Over the years, the industry has witnessed consistent growth facilitated by the consumer preference for organic hair care products. Moreover, the industry is anticipated to expand at a CAGR of 8.8% from 2025 to 2030 and attain a market size of USD 9.70 billion by 2030. 6 This growth in the industry is anticipated to be supported by changing consumer preferences and the willingness of consumers to invest in premium products that deliver faster and reliable results. The industry has embraced innovation, particularly through the incorporation of natural and organic ingredients in hair care and styling products to meet the evolving market demand.

Beauty and Personal Care Industry

The strong economic expansion and expedited urbanisation of India has positively impacted the growth of the beauty and personal care industry. This growth has been reinforced by a confluence of factors, such as widened smartphone user-base and easier access to internet. Moreover, the growth of e-commerce platforms has broadened the accessibility of global and domestic brands to a larger customer base. In the coming years, this growth is expected to sustain as the industry is anticipated to attain a market size of USD 48.3 billion by 2033. 7 Growing middle income demographic, elevated disposable income of the consumers are expected to be principal drivers of this growth.

Oral Care Industry

The growth in the Indian oral health industry can be attributed to the heightened awareness of oral health and preventive dental care. Along with this, the rising disposable incomes, demand for premium dental products, urbanisation as well as advancement in oral care technology have also contributed to the growth of Indian oral care industry. This growth is expected to continue further and the domestic industry is anticipated to attain a market size of USD 3.2 billion by 2033. The industry is expected to grow at a CAGR of 5.18% from 2025 to 2033. Augmented access to oral health care solutions owing to the expansion of modern retail channels and expedited adoption of e-commerce platforms is expected to fuel growth in the industry.

Baby Care Industry

The Indian baby care industry experienced swift growth over the years and it is characterised by a high degree of market concentration. Leading players have established strong brand recognition and offer an expansive portfolio of products. Additionally, industry witnessed a substantial flow of investment in R&D activities during the year under review. The domestic industry is anticipated to grow at a CAGR 14.35% from 2024 to 2030 and attain a market size of USD 31.68 billion in 2030. This growth in the industry will be supported by growing population, rising birth rate and augmented purchasing power among the consumers.

Industrial surfactants are a diverse group of chemicals with cleansing and solubility properties. The surge in demand for surfactants spanning industries, such as agriculture, textiles and paints has contributed to the overall growth of the Industrial Surfactants in India. Key players in the industry have invested heavily in R&D initiatives to develop innovative surfactants to cater to the evolving industry requirements.

Factors driving the demand for industrial surfactants in India

India is anticipated to have the largest urban population in the world by 2050. This will substantially augment the demand for cleaning and personal care products, thereby bolstering growth in the industrial surfactant industry

The Indian Government has introduced a suit initiative to support domestic manufacturing. These initiatives such as the Make in India will play a crucial role in promoting domestic manufacturing of high quality and innovative surfactant solutions

By reducing the friction and providing lubrication for smooth drilling operations, the growth in industrial surfactants demand will be supported by an increase in oil exploration activities

The growth in the Indian pharmaceutical industry is anticipated to boost the growth of industrial surfactants that are essential for drug formulation

Surfactants play an integral role in agrochemicals by enhancing the effectiveness of pesticides and herbicides. The Indian agrochemical industry is anticipated to grow at a CAGR of 6.5% from 2024 to 2030 10 .

Company Overview

Aarti Surfactants came into existence following the demerger of the home and personal care division of Aarti Industries Limited. The Company specialises in manufacturing ionic and non-ionic surfactants and speciality products. With a strong emphasis on quality, innovation, and customer-centricity, Aarti Surfactants aims to position itself as a trusted supplier of high-performance surfactants across industries such as home and personal care and expanding to Skin Care. The Company specialises in optimising manufacturing processes, enhancing asset utilisation and driving sustainable growth.The Company currently operates two manufacturing unit located in Madhya Pradesh and Silvassa along with a dedicated Research and Development Centre (R&D) in Navi Mumbai which plays a critical role in new product development, process optimization, and sustainability initiatives The Company is led by a team of seasoned professionals and industry experts with deep technical knowledge and business acumen. The leadership team brings decades of experience across chemical manufacturing, supply chain, research, and regulatory affairs. The Company is committed to talent development, safety, and collaborative work culture, empowering its workforce to drive innovation and operational excellence.

Rising Demand in FMCG & Hygiene Segments ?€“ The increasing consumer focus on hygiene, health, and personal care continues to boost demand for surfactants used in household cleaning, laundry care, and personal care products. Post-COVID, hygiene-related categories have seen sustained momentum, with both urban and rural markets adopting higher consumption levels of cleaning and sanitization products. This trend is expected to remain a long-term structural growth driver.

Driving Sustainability ?€“ Evolving consumer preferences and tightening environmental regulations are accelerating the shift towards sustainable and eco-friendly surfactants. Global and domestic FMCG brands are actively seeking formulations with reduced environmental impact. The Company is leveraging its R&D expertise to develop eco-conscious solutions, incorporating renewable raw materials and adopting processes aligned with sustainability.

Robust R&D Capabilities ?€“ The Companys dedicated R&D Centre at Navi Mumbai is a key enabler of innovation, offering advanced formulation development, customization for client-specific requirements, and continuous improvement in product performance. With a focus on value-added and specialty surfactants, the R&D team works closely with customers to co-create solutions, thereby strengthening long-term business relationships.

Strategic Manufacturing Footprint ?€“ The Companys manufacturing facilities in Pithampur, Madhya Pradesh, and Silvassa are strategically located to offer logistics efficiency, cost advantages, and quick access to suppliers and key customer clusters. This geographic advantage not only ensures timely deliveries but also enhances competitiveness in both domestic and export markets.

Opportunities and Threats

Opportunities

1. Scaling Up in High-Growth Segments

The Indian chemical sector, including the surfactants space, is experiencing a surge in demand supported by rising household consumption, rapid urbanisation, and increasing disposable incomes. End-use industries such as FMCG, agriculture, and industrial manufacturing are expanding their consumption base,creatingafavourableenvironmentforcapacity augmentation. There is a growing shift towards high-value, performance-driven surfactants, including mild and specialty blends that offer superior functionality, and compliance with global regulatory standards. By investing in world-class manufacturing infrastructure, adopting advanced process technologies, and integrating automation, the Company can cater to both domestic and international markets more effectively.

2. Expanding International Market Presence

Indian chemical companies have achieved robust export growth, and the surfactants sector is no exception. The Companys proven capabilities in producing quality surfactants that meet stringent international specifications provide a strong foundation for deeper global penetration. Enhancing the Companys physical presence in key geographies through application development centres, regional warehouses, and dedicated sales offices will enable faster response times, closer customer collaboration, and improved value chain integration. This strategic expansion will not only capture new demand pockets but also strengthen relationships with multinational clients.

3. Strategic Collaborations, R&D Alliances, and Programmatic M&A

A shift from ad-hoc acquisitions to a structured, programmatic approach to mergers, acquisitions, and joint ventures offers significant potential. Collaborating with global innovators can accelerate access to proprietary surfactant technologies, eco-friendly chemistries, and specialised application expertise. As international companies realign portfolios due to margin pressures, there is a window of opportunity to acquire niche technologies and R&D platforms that complement the Companys growth aspirations and sustainability goals.

4. Enhancing Capital Expenditure and Process Efficiency

The Indian chemical industry has over USD 11.5 billion of planned investments in the near term, and surfactant manufacturers are expected to be key beneficiaries. For the Company, upcoming capacity expansion and debottlenecking projects offer a chance to embed best-in-class project execution frameworks, minimising delays and cost overruns.

Leveraging process intensification, energy-efficient technologies, and digital manufacturing tools can drive operational excellence. Furthermore, adopting sustainable principles and sourcing will strengthen compliance readiness and appeal to environmentally conscious customers.

Threats

1. Dependence on Imported Raw Materials

Indias reliance on imported raw materials exposes the industry to global price volatility and supply chain disruptions, impacting production costs and timelines.

2. Intensifying Global Competition

The entry of new players, especially from countries like China and the Middle East, is increasing competition in the speciality chemicals market, potentially leading to price pressures and reduced market share for Indian companies.

3. Stringent Environmental and Regulatory Compliance

Adhering to international environmental standards and regulations can be challenging, particularly for small and medium-sized enterprises, due to the associated compliance costs.

4. Infrastructure and Logistics Challenges

Inadequate infrastructure, including poor port connectivity and an unreliable power supply, can hinder efficient production and distribution, thereby affecting the industrys overall competitiveness.

5. Geopolitical Tensions and Trade Disruptions Global geopolitical issues can lead to trade disruptions, affecting export momentum and supply chains, which in turn can impact the earnings of Indian speciality chemical companies.

6. Tariffs and Trade Restrictions

The imposition of tariffs and other trade restrictions by the United States poses a potential threat to the Companys export competitiveness. Any increase in tariffs on imports may adversely impact demand from US-based customers, reduce price competitiveness, and put pressure on margins. Additionally, such measures may disrupt supply chains, delay shipments, and create uncertainty in long-term contracts. While the Company continues to diversify its customer base across geographies to mitigate concentration risks, sustained or expanded tariff measures could impact export volumes and profitability.

7. Intensifying Competition and Margin Pressure The surfactants and specialty chemicals sector is witnessing heightened competition from both domestic players and global entrants expanding their presence in India. Increased competition in key product categories may result in pricing pressure, reduced margins, and higher customer acquisition costs. Additionally, the growing shift towards value-added and sustainable solutions demands continuous investment in R&D and capacity building. Failure to maintain cost efficiency, differentiation, and innovation could impact the Companys market share and profitability.

Formation of Research and Development (R&D) Centre

The Company recognises that research and development is not merely a support function but a strategic enabler for sustainable growth in the highly dynamic chemical industry. The increasing diversification of customer requirements, combined with evolving environmental regulations and global competition, has made continuous innovation an imperative. Against this backdrop, the Company has made significant investments to develop robust R&D capabilities, positioning itself to respond proactively to market trends and technological advancements.

The R&D centres are manned by highly qualified professionals possessing deep domain expertise in surfactants and specialty chemicals. These teams are adept at translating market insights into product innovations that cater to emerging customer needs, comply with stringent quality and environmental standards, and offer competitive cost efficiencies.

The Companys R&D infrastructure is equipped with advanced analytical, formulation, and pilot-scale facilities, enabling end-to-end research, testing, and scale-up. A structured programme management framework ensures a seamless workflow across the product lifecycle from new enquiry and feasibility analysis to lab-scale development, pilot testing, and full commercialisation. This approach not only accelerates time-to-market but also optimises resource utilisation and ensures alignment with strategic priorities.

Sustainability and product stewardship remain at the core of the Companys R&D agenda. Efforts are directed towards developing eco-friendly formulations, reducing energy and water footprints, and maximising the use of renewable and eco-freindly raw materials. The Company continues to explore innovative solutions for waste valorisation, enabling conversion of by-products into value-added products, thereby supporting circular economy objectives.

Collaboration is another defining feature of our R&D ecosystem. The R&D function works in close synergy with sales, production, and quality assurance teams to ensure that innovations are not only technically sound but also commercially viable and scalable. We also engage with customers, suppliers, and academic institutions to co-create solutions that address specific performance requirements and market gaps.

This integrated and forward-looking R&D framework enables the Company to strengthen its competitive positioning, expand its product portfolio, and capture opportunities in both domestic and international markets. By embedding innovation into its core business processes, the Company is well-positioned to sustain long-term value creation for all stakeholders.

Geographic presence as on March 2025 (in%)

Financial Performance with respect to Operational Performance

Particulars	FY 2024-25	FY 2023-24
Total income	66,256.42	58,999.05
COGS	54,184.43	44,583.19
Employee costs	2013.38	1789.48
Other expenses	6250.66	6,240.09
EBITDA	4539.71	4622.25
EBITDA margin	6.85%	7.83%
Depreciation	1711.65	1,598.02
EBIT	1649.96	3218.89
EBIT margin	2.49%	5.43%
finance costs	1155.15	1,403.36
PBT	2114.74	3,312.88
Tax	615.74	1,086.19
PAT	1433.42	2,121.32
PAT margin	2.16%	3.60%

Also, the Company has been rated as CARE A-; Stable and CARE BBB+; Stable for its Long Term Banking Facilities and Long Term Instruments i.e. Redeemable Preference shares from CARE Ratings Limited.

Ratio	FY 2024-25	FY 2023-24	Increase/Decrease
Interest Coverage Ratio	4.30%	4.49%	(0.19%)
Operating Profit Margin	7.53%	10.68%	(3.15%)
Net Profit Margin	2.27%	3.77%	(1.15%)
Return on Net Worth	12.28%	11.50%	0.78%

Business Outlook

Looking forward, in FY26, the Companys business environment is expected to be shaped by a combination of encouraging demand trends and evolving supply-side dynamics across global markets. The Company remains focused on leveraging its diversified presence, robust customer relationships and operational strengths to navigate these conditions and capture emerging opportunities.

Demand Dynamics

The demand landscape across the key operating regions is showing a steady and broad-based recovery. In the Asia-Pacific (APAC) and European markets, sustained momentum is supported by improving consumer sentiment, stabilising inflation, and resilient industrial activity. These regions are also benefitting from a gradual rebalancing of supply chains and increased regional trade flows, offering us new avenues for market penetration.

Indias domestic market is regaining momentum, aided by improving urban demand and the anticipated rural consumption boost from a higher-than-average monsoon as forecast by the India Meteorological Department. Historically, favourable monsoon conditions have led to increased agricultural output, higher rural incomes, and a ripple effect on consumption in multiple sectors such asa positive signal for the Companys domestic sales outlook.

Supply-Side and Cost Environment

While demand trends are showing signs of improvement, supply-side challenges remain a key consideration. Price volatility is expected to persist, particularly in light of the United States imposition of reciprocal tariffs, which has introduced additional uncertainty in global trade flows.

Furthermore, ongoing logistical challenges ?€” including congestion at major ports and the continued avoidance of the Suez Canal route due to geopolitical risks ?€” are likely to keep transit times and shipping costs above historical averages. These factors may impact input costs and delivery timelines, necessitating continued focus on supply chain optimization, strategic sourcing, and operational efficiency.

We are addressing these challenges by actively optimising our logistics strategy, diversifying sourcing channels, and building greater resilience into our supply chain. Our established supplier network and operational flexibilitygiveustheabilitytorespondswiftlytodisruptions, thereby minimising potential business impact.

Macroeconomic Enablers

We believe that macroeconomic stability will play a pivotal role in sustaining the ongoing recovery. The revival of global consumption, supported by a potential easing of interest rates in key economies, would encourage both consumer spending and industrial investments. This could, in turn, drive incremental demand for our products across multiple sectors and geographies.

Strategic Positioning for Growth

Barring any unforeseen macroeconomic or geopolitical disruptions, we expect FY26 to be a year of renewed growth momentum. Our diversified global portfolio, presence in both mature and emerging markets, and ability to offer customised, high-value products position us well to capture incremental demand. Additionally, our ongoing investments in R&D, operational efficiency, and customer engagement will serve as critical enablers of long-term competitiveness.

In alignment with strategic priorities, the Company continues to strengthen its market positions, expand in high-growth geographies and explore synergistic opportunities that can enhance shareholder value. The focus remains on delivering sustainable growth, supported by disciplined execution and prudent financial management.

Overall, the Company remains cautiously optimistic about the business outlook for FY 2026. The combination of improving demand, a proactive operational strategy and a diversified market presence provides the Company with the confidence to navigate uncertainties while capitalising on the positive demand trajectory.

Human Resources

Human resources form the cornerstone of Aarti Surfactants long-term success and competitiveness. The Companys HR strategy is thoughtfully crafted to attract, develop, and retain a highly skilled, motivated, and diverse workforce. This approach is underpinned by a commitment to creating a safe, inclusive, and positive work environment that fosters both personal well-being and professional growth.

Employee safety and welfare remain paramount. The Company undertakes regular health and wellness initiatives, including periodic medical check-ups, wellness courses and fitness challenges aimed at promoting holistic well-being. Equal emphasis is placed on learning and development, with targeted upskilling programs designed to equip employees with the knowledge and competencies required to excel in a rapidly evolving industry landscape. Structured career development pathways, mentorship opportunities, and training interventions are provided to enable employees to realise their full potential.

The Company also upholds its commitment to equitable employment practices, offering fair opportunities regardless of gender, background, or experience. An engaging and collaborative workplace culture is actively nurtured, ensuring that every employee feels valued, respected, and encouraged to contribute their best.

As on March 31, 2025, the Company employed 374 people across its operations, reflecting its continued focus on building a robust human capital base to support sustainable growth.

Information Technology

Given the nature of the industry, Information Technology is integral to the Companys operations, enabling efficiency, data security, and resilience. The Company maintains stringent data privacy, cybersecurity, and information security measures to safeguard sensitive business information and ensure confidentiality and integrity. Robust controls, governance mechanisms, and an Information Security Management System (ISMS) assign clear responsibilities to all stakeholders, including employees, contractors, vendors, suppliers, customers, and visitors. Advanced cybersecurity protocols protect against malicious attacks and unauthorised access, while strong data management practices enhance decision-making and mitigate risk. Personal data protection remains a priority, and a well-defined Business Continuity and Disaster Recovery plan ensures minimal disruption and rapid restoration of operations in the event of unforeseen incidents.

QUALITY ASSURANCE

The Company is committed to delivering products that meet global quality standards, supported by advanced R&D and Quality Control (QC) laboratories equipped with state-of-the-art analytical instruments for continuous monitoring. Stringent quality protocols are embedded across operations to ensure consistency, reliability, and customer satisfaction. By emphasising domestic sourcing, the Company reduces dependence on imports, strengthens its supply chain, and maintains consistent product quality. Its focus remains on being a dependable provider of high-quality surfactants for home care and personal care applications.

Aim

Improve Quality of its products and services

Surpass customers & relevant stakeholders needs & expectations

Upgrade manufacturing technologies and quality standards to achieve and maintain quality leadership, with trust on eco-friendly processes

Effort

Robust quality systems to manufacture and deliver superior quality products

Ensure compliance to high quality standards

Safety, quality and efficacy global standards maintained at all our facilities

Adhere to "RIGHT THE FIRST TIME" approach in planning and execution of all the process, products and services through a life cycle approach

Seek constant customer feedback for product and process improvements

Strict compliance to various national and international standards

Result

A motivated team with a world-class competency to achieve the aims

Superior quality products and services delivered to customers with Right Time First

Delivered more than the customer ask

Stay ahead of curve by understanding customer needs and market trends

Risks and Concerns

The Company operates in a dynamic business environment where various internal and external factors can impact its operations, profitability, and long-term sustainability. Key risks and their mitigation strategies are as follows:

Category	Risk Description	Mitigation Strategy
	Interruptions in supply chain and transportation networks	\u2022 Maintain safety stock of critical inputs and finished goods.
Supply Chain Disruptions	may limit access to essential raw materials and delay delivery of finished goods.	\u2022 Partner with multiple logistics providers to ensure flexibility.
		\u2022 Use technology for real-time tracking and swift resolution of bottlenecks.
	Prolonged project timelines	\u2022 Actively monitor and optimise receivables,
Project	may increase financing	payables, and inventory to sustain liquidity.
Development	needs and postpone revenue	\u2022 Secure short-term funding facilities to bridge
Challenges	generation.	working capital gaps during non-revenue
		phases.
	Unpredictable weather	\u2022 Invest in energy-efficient technologies to
Environmental &	patterns and climate	reduce dependency on high-cost utilities.
Weather-Related	variability can escalate	\u2022 Explore alternative and renewable energy
Risks	operational costs and disrupt	sources to stabilise costs.
	production processes.
	Misalignment between	\u2022 Regularly review plant and workforce utilisation
Resource	production capacity,	to optimise productivity.
Utilisation	manpower, and demand	\u2022 Strengthen coordination among production,
Constraints	could create operational	procurement, finance, and sales teams for
	inefficiencies.	effective resource deployment.
	Political instability, sanctions,	\u2022 Continuously monitor political and economic
Geopolitical &	or shifts in trade policies	developments in key markets.
International	can disrupt cross-border	\u2022 Adopt secure payment instruments such
Trade Risks	operations and market	as letters of credit or advance payments to
	access.	safeguard receivables.
	Tariffs and trade	\u2022 Expanding into new geographies and high-
	restrictions, particularly in	value product segments to reduce dependency
Exposure to
	the US, may reduce export	and maintain competitiveness.
Tariffs and Trade
	competitiveness, impact	\u2022 Streamlining procurement, production, and
Restrictions
	demand, and put pressure on	logistics while monitoring trade regulations to
	margins	manage tariff impact.

Internal Control Systems and Adequacy

The Company has a well-structured internal control system designed to ensure strict adherence to established policies and procedures, compliance with applicable laws and regulations, accuracy and reliability of management information and financial reporting, timely detection and prevention of fraud, and safeguarding of assets against unauthorised use or disposition.

The internal control framework is commensurate with the size, scale, and nature of the Companys operations. It promotes ethical business practices, supports sound corporate governance, and facilitates effective risk management. The Company has appointed internal auditors to monitor and verify compliance with internal policies, procedures, and legal requirements.

The Audit Committee of the Board provides oversight of the internal audit function, reviews the adequacy and effectiveness of internal controls, evaluates audit findings, and monitors implementation of recommendations. The Committee ensures that identified control gaps are addressed promptly and effectively. Any deviations are promptly reported to management, allowing for swift corrective action to ensure business continuity and maintain risk at manageable levels.

Internal audits are conducted in accordance with an annual audit plan approved by the Audit Committee. The Company follows a risk-based internal audit approach covering both manufacturing facilities and head office processes, ensuring that the audit focus remains aligned with the Companys operational priorities and risk profile. The Audit Committee receives detailed reports on audit observations and recommendations, along with periodic updates on the status of corrective actions until their closure.

Cautionary Statement

The Management Discussion and Analysiss statements about the companys goals, forecasts, estimates and expectations can qualify as "forward-looking statements" under the relevant securities laws and regulations. A number of factors may cause assumptions, actual future outcomes and events to differ considerably from those stated in the forward-looking statements, so readers are advised not to rely on them too much. The Company is not obligated to update any forward-looking statements based on new information.