Avery India Ltd Management Discussions

AVERY INDIA LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT: Weighing industry consists of Industrial Weighing and Retail segments. Weighbridges, process weighing and in-motion weighing constitute major part of Industrial weighing segment. In Industrial weighing segment, process weighing equipment, in-motion weighing systems, load cell manufacturing and high end weighbridges etc. constitute high technology products area which require superior technical capabilities to manufacture, contribute better margins and have less number of players. Your company mainly deals in high technology products area of Industrial weighing segment. Your company also deals in fuel dispensing pumps segment in which there are only a few manufacturers but there is intense competition due to small number of buyers. SEGMENT-WISE PERFORMANCE: Weighing Machines and Fuel Dispensing Pumps are two main business segments in which your company operates. Your Company sold 1958 weighing machines for Rs. 432 million during the year under report. Steep rise in steel price during early part of the year and subsequent correction in the later part caused customer to defer, reschedule and renegotiate their orders severely impacting the order book of the Company. Fuel prices shot up during the year forcing oil companies to defer their procurement plans therefore in Fuel Dispensing Pumps segment turnover of the Company was negligible. FINANCIAL PERFORMANCE: Profit before tax during the financial year under review improved to Rs.106 million from Rs.93 million in the previous year. Out of Profit before tax of Rs. 106 million a sum of Rs. 39 million has been appropriated towards Provision for Taxation and Rs. 2 million towards provision for fringe benefit tax. Reserves & Surplus have increased from Rs. 386 million to Rs. 451 million and Shareholder funds have gone up from Rs. 484 million to Rs. 549 million. OPERATIONAL PERFORMANCE: During the year Materials & Manufacturing expenses as well as Administrative & other expenses reduced as compared to previous year while Employees Remuneration and Benefits expenses remained almost the same as previous year. During the year Materials & Manufacturing expenses were Rs.336 million as against Rs. 382 million and Administrative & other expenses were Rs.119 million as against Rs. 137 million in the previous year. Employees Remuneration and Benefits expenses were Rs.153 million as against Rs. 156 million in the previous year. RISKS AND CONCERNS: Steep rise and wide fluctuations in fuel price as well as in steel price are major cause of concern for the Company. Main items manufactured by the Company i.e. Weighbridges and Fuel Dispensing Pumps are highly cost intensive therefore increase in raw material cost, particularly steel price is a major concern for the Company. Fluctuation in price not only makes it difficult to pass on the cost to the customer; it also makes customers to defer their buying decision severely hampering order flow and production schedule of the Company. OPPORTUNITIES, THREATS AND OUTLOOK: It is expected that revival of Indian economy and growth in industrial sector will boost demand for the Companys products also. Potential areas of growth for the company continue to be Load cell manufacturing and process weighing. Besides that growth of ERP packages and their implementation and software integration in more and more organizations will also open new opportunities for the Company. INTERNAL CONTROL SYSTEMS AND ADEQUACY: The Company has an adequate system of internal controls to ensure that transactions are properly recorded, authorized and reported apart from safeguarding Companys assets. Well-experienced Chartered Accountant firms appointed by the Company for internal audit, review operations at all the establishments of the Company at least twice a year. All significant audit observations and follow up actions thereon are reported to the Audit Committee. The Audit Committee also reviews the adequacy and effectiveness of the internal control system. HUMAN RESOURCE: Your Directors wish to place on record their appreciation for the commitment and dedication shown by the employees at all the areas of operation of the Company. Various HR initiatives are taken to align the HR policies to the growing requirements of the business. The Industrial Relations remained cordial during the year. As on 31st March 2009 your company had 562 employees. INSURANCE: All the assets of your Company including Plant & Machinery, Building, and Equipment etc. have been adequately insured. RESEARCH & DEVELOPMENT: R&D activities of your Company remain focused on development of new Load Cell under the technology transfer from Avery Weigh-Tronix. Besides load cells, work on further development and improvement of various products in Weighing as well as Fuel Dispensing Pumps segment was also progressed during the year.