<dhhead>MANAGEMENT DISCUSSION AND ANALYSIS</dhhead>
SUGAR :
Sugar Industry is an important Agro-based Industry that impact the
rural livelihood of 50 Million farmers and around 5 lakh workers directly employed in
Sugar Mills. This also generates indirect employment like transport services, trade
servicing of machinery and supply of Agricultural inputs.
Sugar Industry continues to be in a difficult situation that has
culminated into a crisis. The Cane Pricing Policy of the Central and State Governments
without linking to the Sugar price has been detrimental to the financial health of the
Sugar Industry. This has made many Sugar Mills sick in view of the mounting arrears of
cane payments. In such a dismal scenario, there is an urgent need for the Government to
ensure parity of cane price payable by Mills to farmers and the sale price realisation to
the Mills which would enable the Mills to ensure prompt payment to the farmers without any
arrears. Mounting cane arrears has become a worrying factor for the Industry. Further, the
land available for planting Sugarcane crops is coming down year by year due to the low
yield of Sugarcane per hectare and also in view of farmers opting to grow other crops
where they can get a quick realisation of cash. The high cost of production especially
increasing labour cost and the un-scientific method of cane price fixation has severally
impacted the financial health of the Mills.
At present the focus of the Government should be to provide incentives
for development of high yielding and high sucrose content varieties of cane and also to
ensure that diseases and pest do not damage the Sugarcane crop. In view of the slow
movement of Sugar stocks in domestic market, there is also a need for Government to
continue export subsidies. It is welcoming that to give encouragement to Mills to step-up
Ethanol production, a significant step has been taken by the Government permitting
production of Ethanol directly from Sugarcane juice. This will facilitate the Mills in
creating new Ethanol capacities. This would also give impetus to the Governments Ethanol
Fuel Blending Programme. However, it is important that the price paid by Oil Manufacturing
Companies matches the efforts and cost of production of Ethanol.
Sugar Mills are not even able to recover Fair Remunerative Price, fixed
by Government of India. This is making difficult for Sugar Mills to meet the cane payment
obligation. Measures such as Rural Employment Guarantee Scheme which is being offered by
the Government of India requires to be introduced for cane harvesting labour also so as to
be helpful to the cane growers. Arranging Awareness Programmes by State and Central
Governments is very much needed to motivate the Cane Growers to realise the benefits of
Mechanisation in Sugarcane farming, good ratoon crop management and adopting of other new
agricultural practices to improve the yield.
CHLOR ALKALI:
Your Company has an Integrated Chemical Complex at Saggonda
manufacturing Caustic Soda, Chlorine and other Allied Products as on 31.03.2023. A 600 TPD
Caustic Soda Plant is in operation at Saggonda village of Gopalapuram Mandal and a 25 TPD
Caustic Potash Plant at Kovvur, East Godavari District, Andhra Pradesh.
During the year 2022-23, Caustic Soda market scenario has got
fluctuated in domestic markets, owing to the following reasons :
During the year 2022-23, Caustic Soda Imports were declined by 36.28%,
compared to previous year.
Major Caustic Soda Units in USA went under shut, due to severe power
crisis and raw material shortages. Similarly, Caustic Soda Units in China had been badly
hit, owing to severe crisis of Coal and Power. Since China and USA are the major supplier
of Caustic Soda, exports of Caustic Soda from these countries had been restricted
substantially.
Due to decline in Caustic Soda imports, availability of the product is
not enough as against the genuine demand in domestic markets. Moreover, some of the
manufacturers prefer to Export Caustic Soda to other Countries, with a view to attain
better realizations rather than domestic prices. All these factors show the way to
increase the prices consistently in domestic markets.
With the demand being strong from the downstream and the economy
reviving from the corona virus related lockdowns, price stabilization seems far away in
the upcoming period."
To catch hold the flourished conditions, indigenous manufacturers have
utilized production capacities at optimum level. In addition, enhanced production
capacities come into existence, which lead to accumulation of stocks of co-products of
Chlorine and HCL. Owing to power holiday and raw materials shortage, some of the Pharma
Units as well as medium scale industrial segments reduced their production ca-
The Andhra Sugars Limited
pacities by 30% to 40%. All these factors have adversely influenced on
domestic manufacturers in terms of disposal of Chlorine and HCL.
Power which is a major input for the production of Caustic Soda is
required to be available at an economical price. There is a need for the Government to
classify this Industry under "Energy Intensive Industry" in order to get the
benefit of availing Power at a concession rate.
Despite the market constraints are prevailed, consequent upon long
lasting association, your Company has been getting consistent support from the bulk
Customers and Traders who have been honoring their off-takes. This has given an advantage
to your Company to produce Caustic Soda as per the Production and Marketing Plans
perceived.
Increasing imports from other countries is one of the factor causing
steep decline in the Market Price of Caustic Soda.
ASPIRIN:
In the year 2018-19 there was a great amount of consolidation in the
number of manufacturers of Aspirin formulations at the premium end, with the brands of
Novartis, Sandoz and Pfizer all being consolidated under one single umbrella of GSK
Consumer Health. And the year 2022 saw GSK bifurcating and merging its Pharmaceutical
business into HELEON Group of Companies, Headquartered in the UK.
Moving forward we expect to restart the US business of Haleon (earlier
Novartis/GSK) by the end of 2023, and also get approved by prospective new customers in
the US for supply of our Aspirin Starch Granules along with Aspirin Crystals. Their usage
is around 1,500 MT per annum. With this, export volumes are likely to increase for
2023-24.
We continue to work on to increase the Global business particularly in
Regulatory Markets, as our Aspirin Plant is meeting the international standards under the
current Good Manufacturing Practices (cGMP) and approval from USFDA, EDQM and TGA, our
clientele has increased in recent years because of the availability of regulatory
documents facilitating our customers to register their end products in respective markets.
These are to get results in coming years with increased commercial value.
Meanwhile, indigenous business is continuing which is currently helping
in reducing the gap of decreased export sales.
SALICYLIC ACID & SODIUM SALICYLATE :
We manufacture various grades of Salicylic Acid and Sodium Salicylate.
There is a good potential for Salicylic Acid in India. We continue to work on to increase
the business of these products. Our products are approved and under validation by
prospective new customers. With this, volumes are expected to increase in 2023-24. As such
we are proposing for Capacity addition of Salicylic Acid Plant by 2640 TPA which will be
put into use by Decem-ber, 2023.
In the coming years, the focus would be on to widen our Overseas and
Indigenous client base.
POWER:
Your Company operates Chlor Alkali Plants which are Power Intensive
with Power constituting a major input cost. Therefore, it is essential for your Company to
ensure the availability of quantity and quality of Power to be self-sufficient in
production and remain competitive. Keeping this in view, your Company established a 33 MW
Captive Generation Thermal Plant at Saggonda. This is in addition to Solar Power Plant in
operation at Kovvur. These two Plants will ensure adequate Power for Chemical Plants.
Apart from this, the Company as a Shareholder avails Power from Andhra Pradesh Gas Power
Corporation Limited (APGPCL), a Gas based Power Generation Company. The Power availed from
this source is cheaper compared to State Electricity Board Power. From November, 2022
onwards there was no allocation of Natural Gas to APGPCL which resulted the operations of
APGPCL came to hault. The Company also opts to avail Open Access Power in order to ensure
that the Power is obtained at an economical rate. This would facilitate in augmenting the
Power requirements of Chemical Plants.
INTERNAL CONTROL SYSTEM
Your Company regularly reviews the financial and operating controls of
the various Units. The Internal Control System of your Company is commensurate with its
size and nature of business.
As per the provisions of the Companies Act, 2013 the Statutory Auditors
have annexed a Report on Internal Control System to the Independent Auditors Report
pertaining to Financial Year 2022-23.
SEGMENT-WISE PERFORMANCE
Segment-wise performance has been given separately vide Annexure - II
of Group Consolidated Accounts.
Details of Significant changes in key financial ratios:
|
Ratio |
2022-23 |
2021-22 |
Change % |
Explanation for change |
1) |
Debtors Turnover |
8.94 |
8.15 |
9.69 |
-- |
2) |
Inventory Turnover |
4.21 |
3.34 |
26.04 |
-- |
3) |
Interest Coverage Ratio |
85.97 |
17.68 |
386.25 |
Reduction in Debt |
4) |
Current Ratio |
4.14 |
4.06 |
1.97 |
-- |
5) |
Debt Equity Ratio |
0.03 |
0.04 |
25 |
Reduction in Debt |
6) |
Operating Profit Margin (%) |
21.22 |
23.27 |
(8.81) |
-- |
7) |
Net Profit Margin (%) |
11.98 |
13.28 |
(9.78) |
-- |
Details of change in Return on Net worth:
Ratio |
2022-23 |
2021-22 |
Change % |
Explanation for change |
Return on Net Worth. |
13.53% |
11.95% |
13.22% |
Increase in Net worth is
due to higher and profitability reduction in debt. |
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Your Company has earned a Gross Profit of Rs.297.07 Crores (before
interest and depreciation) against Rs.283.27 Crores (before interest and depreciation) in
last year.
The gross Fixed Assets of your Company as on 31.3.2023 is Rs.1167.64
Crores compared to Rs.1008.93 Crores during the previous year 2021-22. Your Company has a
net worth of Rs.1358.05 Crores.
As on 31.03.2023 the Fund based working capital limits is Rs.78 Crores
and Non-fund based working capital limits is Rs.46.80 Crores.
HUMAN RESOURCE DEVELOPMENT / INDUSTRIAL RELATIONS
Your Company continuously reviews and monitors its manpower
requirements to ensure that it has human skills commensurate with its needs. Industrial
relations continued to be cordial. As on 31.3.2023 your Companys employees strength
stands at 2,163.
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