chemfab alkalis ltd Management discussions

CHLOR-ALKALI INDUSTRY STRUCTURE AND DEVELOPMENTS

Chlor-Alkali is the basic Heavy Chemical Industry, manufacturing Caustic Soda, with Chlorine, Hydrogen, Sodium Hypo Chlorate and Hydro Chloric Acid as by-products. Overall, the Financial Year 2014-15 was an average year for the Industry, primarily due to the fall in international caustic prices which averaged during the year between USD 320 340 per MT CIF. Also, the Rupee depreciation during the year made imports cheaper, resulting in increased flow of imports into the country thereby impacting our product realizations on the domestic front. Added to it chlorine realizations continued to be subdued resulting in overall lower realisation. Capacity utilization of the Industry for the year continued to prevail around 80%.

OPPORTUNITIES AND THREATS

In the last few weeks of Q4 of the Financial Year under review, both the international caustic prices and the US Dollar strengthened. International caustic prices have now moved to USD 360-380 per MT CIF levels and are expected to remain in this band in the short term which will have a positive impact on our realizations.

Rate of capacity build-up in the Industry has dropped and this should help in improving the existing capacity utilization of the Industry in the forthcoming year.

On the chlorine utilization front, slow demand growth continued to have an adverse impact on the Industry. This mismatch is expected to continue.

The investments and efforts taken by the Company during the Financial Year are expected to result in significant savings in our manufacturing costs, especially power cost.

SEGMENT -WISE OR PRODUCT -WISE PERFORMANCE

The Company operates in one segment viz, Chlor Alkali. The volumes across production and sales in 2014-15 remained similar to the previous year.

OUTLOOK

With the rebound in the country’s GDP, the demand for caustic especially, is likely to grow strong. However, slower chlorine demand is expected to continue to impact the capacity utilisation of the Industry.

RISKS AND CONCERNS

Dependence on the grid power continues to be a risk though the Puducherry power scenario remains reasonably stable but with the cost of power continuing to be a concern. The Company is working with the Puducherry Government for the implementation of Open Access which would help de-risk our power sourcing.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has well defined and adequate internal controls and procedures, commensurate with its size and nature of its operations. This is further strengthened by the Internal Audit done concurrently.

Besides, the Company has an Audit Committee comprising Non-Executive Directors to monitor its financial systems, controls, management and operations.

The Company has obtained certification for ISO 14001 and OHSAS 18001 systems to take care of critical operational areas.

It also utilizes the services of professional bodies like Central Leather Research Institute (CLRI) / The Energy and Resources Institute (TERI) / National Environmental Engineering Research Institute (NEERI) as also Consultants to continuously analyze and upgrade its operations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The sales volumes during the Financial Year 2014-15 remained at similar levels as in the previous year. However, the realizations declined due to market conditions resulting in the overall reduction in Sales turnover for the year. Further the increase in the power cost also had an adverse effect on the profitability for the year.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PERSONS EMPLOYED.

During the year under review, the Industrial Relations continued to be cordial.

The Company has given direct employment to 170 persons and indirect employment to 116 persons.

CAUTIONARY STATEMENT

The Statements made in this Report on Management Discussion and Analysis, describing the Company’s views may be forward-looking statements within the meaning of the applicable security regulations and laws. These Statements are based on certain expectations on demand, imports, availability and cost of power etc. and any change in Government laws and the economic situation in the country would have its impact on the Company’s operations.

The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future for reasons beyond its control.

	For and behalf of Board of Directors of
	CHEMFAB ALKALIS LIMITED
	Suresh Krishnamurthi Rao
Place : Chennai	Chairman
Date : 27th April 2015	DIN: 00127809