Bright Brothers Ltd Management Discussions.
economic and business overview:
The increase in tariff rates by United States (US) on goods imported from China has heightened trade barriers between the worlds two largest economies. According to economists and portfolio managers, if the dispute is prolonged and escalates further it will lead to a slower economic growth. The US and China have placed tariffs on each others goods for nearly 10 months as the US administration has pressed Beijing to change years of what it claims are unfair industrial and trade policies. As a consequence, the Federal Reserve has decided to cut the interest rates if the US and China dont reach a detente in their escalating trade war.
Consumer price inflation has generally remained contained in recent months in advanced economies but has inched up in the United States, where above-trend growth continues. Key sources of risk to the global outlook are the outcome of trade negotiations. If countries resolve their differences without raising distortive trade barriers further and market sentiment recovers, then improved confidence and easier financial conditions could reinforce each other to lift growth above the baseline forecast.
industry structure and development
With the help of Make in India drive, India is on the path of becoming the hub for hi-tech manufacturing as global giants such as GE, Siemens, HTC, Toshiba and Boeing. India has become one of the most attractive destinations for investments in the manufacturing sector.
In the structure of Indian Plastics Industry and Exports, there has been significant progress and the industry has grown and diversified rapidly. The industry spans the country and hosts more than
2,000 exporters. It employs about 4 million people and comprises more than 30,000 processing units, 85-90 percent of which are small and medium-sized enterprises. The Indian Plastics Industry offers excellent potential in terms of capacity, infrastructure and skilled manpower. It is supported by a large number of polymer producers, and plastic process machinery and mould manufacturers in the country.
Among the industrys major strengths is the availability of raw materials in the country. Thus, plastic processors do not have to depend on imports. These raw materials, including polypropylene, high-density polyethylene, low-density polyethylene and PVC, are manufactured domestically.
The below mentioned table gives the present composition of business of your Company.
|Category||Percentage Share in Total Turnover|
|Consumer durable components||96%|
|Brite branded products||4%|
overall financial performance:
The financial performance of the Company has been summarised in the table below followed by explanatory remarks for significant changes in 2018-19 compared to the previous year.
(Rs in lakhs)
|Tonnage processed including job work (In Tons)||12,553||11,863||690||5.82||1|
|Total operational income (net)||23,078.64||21,441.70||1,636.94||7.63||2|
|Changes in finished goods inventory||(81.47)||55.64|
|Consumption of material||16,159.15||14,697.35|
|Purchase of traded goods||166.75||113.28|
|Operating and other expenses||3,693.50||3,813.42|
|Earning before depreciation and finance cost||1,367.29||1,137.24||230.05||20.23||3|
|Other non-operational income||41.24||103.15|
|Depreciation and amortisation expenses||576.75||545.93|
|Profit before tax||210.11||113.27|
|Profit after tax||200.31||120.35|
|Other comprehensive income||(7.59)||10.99|
|Total comprehensive income||192.72||131.34|
|Earnings Per Share||3.53||2.12|
|Net Property, Plant and Equipment (including CWIP)||4,533.27||4,109.75|
1. The tonnage process during the year has increased due to the better customer demand at Puducherry Unit II and III.
2. The increase in operational income is mainly due to higher raw material prices during part of the year and value added activity.
3. EBDITA for the year 2018-19 is Rs 1,367.29 lakhs as compared to Rs 1,137.24 lakhs in the previous year.
4. As on 31st March, 2019, Current Assets and Current Liabilities, both have reduced by Rs 478.46 lakhs and Rs 323.11 lakhs respectively.
5. During the year, Company has invested Rs 721.25 lakhs in Plant and Equipment.
(Rs in lakhs)
|Net cash flow from/(used in) operating activities||(A)||1,053.20||785.87|
|Net cash flow from/(used in) investing activities||(B)||(666.84)||(397.55)|
|Net cash from/(used in) financing activities||(C)||(323.86)||(611.50)|
review of operations
During the year 2018-2019, our customer Whirlpool of India has shown continued growth along with gain in market share in both the refrigerator and washing machine segment. This is despite the uncertain market sentiment due to the upcoming election. Our business with Rialto, for whom we are manufacturing toothbrush handles, has seen an increase of 35% thanks to the introduction of new models which were awarded to us in the previous year. This growth has been accommodated in Puducherry Unit III which was set up last year. Our customer CMI (Carrier Midea India Private Limited) has been expanding its presence in the AC segment, in light of the same our business with them has seen growth in the fourth quarter. Our business with Eureka Forbes remains steady.
The Divo brand has been focusing on expanding its product range to help boost their sales.
Seeing the above our capacities in our Faridabad and Puducherry Unit I show a marginal increase in capacity utilization as compared to last year. Our Puducherry Unit II is showing good utilization in both existing and recently installed capacities.
The company has been awarded another prestigious project for its toothbrush handle manufacture in the Puducherry Unit II. This is a global project which will be sourced from India with an SOP (Start of Production) date of April 2020.
The company has been focusing on marketing its toolroom capabilities to external clients and has identified it as an independent profit centre.
The steady growth projected by our customer Whirlpool of India will ensure better utilization of our installed capacities.
The move towards automation will see more reliability in manufacturing along with maximizing of outputs.
Indias young demographic along with low rural penetration continues to show growth potential in demand for consumer durables.
Continuation of Stable government will see more multinational companies expand their manufacturing presence in India.
The primary business of the company is supplying the consumer durable industry, the nature of which is highly competitive and price revisions are hard to come by, due to which margins remain tight.
The haircare and beauty care division is based on trading and imports and hence any depreciation in Indian currency can have an adverse impact on margins.
The outlook is positive for India, despite softer growth, the Indian economy remains one of the fastest growing and possibly the least affected by global turmoil.
Seeing the market uncertainty and late onset of monsoon we are viewing the year as being flat with minimal growth, the company is focusing on various methods of improving profitability.
The significant changes in the financial ratios of the Company,which are more than 25% as compared to the previous year are summarised below:
|Ratio||F.Y.2018-19||F.Y.2017-18||Change (%)||Reason for change|
|Debt Equity Ratio||0.32||0.20||56%||The change in ratio is due to increase in debt as compared to the previous year.|
|Net Profit Margin ( % )||0.87%||0.56%||55%||Decrease in fixed expenses add to bottom-line profit and increased net profit margin.|
internal control systems
The Company has adequate internal audit and control systems. Internal auditors comprising of professional firms of Chartered Accountants have been entrusted the job to conduct regular internal audits at all units and report the lapses, if any, to the management. Both internal auditors and statutory auditors independently evaluate the adequacy of internal control system. Based on the audit observations and suggestions, follow up and remedial measures are being taken including review and increase in the scope of coverage, wherever necessary. The Audit Committee of Directors in its periodical meetings, review the adequacy of internal control systems and procedures and suggest areas of improvements.
The Company has undertaken a detailed exercise to revisit its control systems in technical and other non financial areas to align them properly with Management Information Systems (MIS) to make MIS more efficient and result oriented. Information technology base created by the Company over the period is providing a very useful helping hand in the process. Needless to mention that ensuring maintenance of proper accounting records, safeguarding assets against loss and misappropriation, compliance of applicable laws, rules and regulations and providing reasonable assurance against fraud and errors will continue to remain the central point of the entire control system.
Statements in this "Management Discussion and Analysis" describing the Companys projections, expectations or predictions may be "forward looking statements" within the meaning of applicable Securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could make a difference to the Companys operation include cyclic demand and pricing of raw materials, changes in Government regulations, tax regimes, cost of power and interest cost and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events or otherwise.
|For and on behalf of the Board,|
|bright brothers limited|
|Chairman & Managing Director|
|Place : Mumbai||DIN: 00032966|
|Date : 21st May, 2019|