Alufluoride Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENT

Alufluoride Ltd. (AL) is the only Company in Andhra Pradesh producing high purity Aluminium Fluoride (AlF3) with technology developed by Alusuisse, Switzerland. This technology facilitates conversion of Fluorine effluents from a Phosphatic Fertilizer Complex into Hydrofluosilicic Acid and then to Aluminium Fluoride. The project ensures pollution abatement, import substitution, conservation of natural resources like Fluorspar and Sulphur, cost effective production, conversion of waste into wealth and earning foreign exchange to the Nation. AlF3 is used as flux in reducing the melting point of Alumina during the electrolytic process of producing Aluminium. Many Aluminium Smelters in India and abroad use the Companys product with repeat orders due to quality and service.

FUTURE OUTLOOK, OPPORTUNITIES, THREATS, RISKS & CONCERNS

Alufluoride Ltd. (AL) commissioned the project in 1995 to produce AlF3, based on an agreement between AL and Coromandel International Limited (Erstwhile Coromandel Fertilizers Ltd., Visakhapatnam (CIL)). As per the agreement, CIL is to supply 4,000 TPA of Hydrofluosilicic Acid (Acid) exclusively to AL. However, since inception CIL was unable to supply the contracted quantity, and therefore the balance acid is being procured from Odisha. It is reported that, all the Aluminium smelters in India and abroad are increasing their Aluminium production capacities and new Aluminium smelters are coming up with high capacities, resulting in an increased demand for AlF3. CIL expanded its Phosphoric Acid production capacity and assured the Company for supply of additional Acid. The Company then signed a long-term acid supply contract with CIL. In view of increased AlF3 demand and availability of additional acid, the Company has taken up expansion of AlF3 production facilities and the project execution is in progress. The risks and concerns for the Company are availability of Acid, increase in transport costs from Paradeep, Odisha, taking on debt for project expansion works, with the usual market risks.

The Company has signed on 8th January, 2020 at Amman, Jordan, a joint venture (JV) agreement, as a majority partner, with Jordan Phosphate Mines Company PLC. (JPMC) to commission a green field Aluminium Fluoride plant at Eshidiya Free Trade Zone, Jordan. The Company is in the process of incorporating a new Company at Dubai, UAE, which will be a subsidiary of Alufluoride Ltd. and as a JV partner with JPMC. Due to COVID-19, incorporation of the new Company at Dubai, UAE was delayed and will be incorporated as soon as logistics permit. The new Company will form the JVC and begin to implement the project.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an internal control system which provides for:

• Efficient use and safeguarding of resources

• Accurate recording and custody of assets

• Compliance with prevalent statutes, policies, procedures, listing requirements, management guidelines and circulars

• Transactions being accurately recorded, cross verified and promptly reported

• Adherence to applicable accounting standards and policies

• IT systems, which include controls for facilitating the above

The internal control system provides for well-documented policies, guidelines, authorizations and approval procedures. The internal audit reports are laid before the Audit Committee and discussions were held periodically by the Audit Committee at its meetings. The observations arising out of audit are subject to periodic review, compliance and monitoring. The significant findings/ observations made in internal audit reports, along with the status of action thereon, are reviewed by the Audit Committee of the Board of Directors on a regular basis for further appropriate action, if and as deemed necessary.

HUMAN RESOURCE DEVELOPMENT

The continued Certification of Quality and Environmental Management System adopted by the Company to ISO 9001, 14001 and OHSAS 18001 manifests to the commitment of all the employees to excellence, committed human resources is principal core strength of your Company and is attribute to the extremely cordial atmosphere prevailing in the Company. The total number of employees stood at 98 as on 31st March, 2020.

DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS (I.E., CHANGE OF 25% OR MORE OVER THE LAST 12 MONTHS):

Sl. No Ratio Year ended 31.03.2020 Yearended 31.03.2019 Change
1. Debtors turnover ratio 24.13 11.32 12.81
2. Inventory turnover ratio 12.41 13.49 (1.08)
3. Current ratio 1.94 2.19 (0.25)
4. Operating profit ratio % 20.86 16.12 4.74
5. Net profit ratio % 19.28 16.66 2.62

Debtors Turnover ratio is high since most of the Debtors have been realized as on 31st March, 2020 and operating profit ratio is high as the Companys overall performance of FY 2019-20 is high than of last year.