DIAMOND AGRO INDUSTRIES LIMITED
ANNUAL REPORT 2003-2004
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The management of Diamond Agro Industries Ltd. is pleased to present its
analysis report for the year 2003-2004.
The company is engaged in the production and manufacturing of edible oil
products including Vanaspati and Refined oils under its brand name "AKASH".
Unluckily due to radical changes in the duty structure and with so many
changes both at national and international levels, the vanaspati Industry
has faced lot of problems in the recent years the factors directly or
indirectly responsible are as follows
1. After The Finance Act (of 2001) duty structure for vanaspati & Edible
oils Industry has seen many changes and subsequently during the years the
duty structures has seen many changes quite often.
2. Then in the international market, the rates of oil has changed so
frequently that along with the fluctuating rate of Duty it is difficult to
plan the production and the cash flow. The import of oil is necessary to
maintain the quality as there is no other local oil available compatible
with the CPO (Crude Palm Oil) which is imported.
3. There is no long term credit available for import of oil which
necessitate more of working capital fund.
4. Then an excise duty of Rs. 1250/- per tonne has also been imposed during
this budget 2003 on vanaspati & refined oil whereas the price realization
is much lesser than the amount of excise duty imposed & thus making margins
5. The company has to incur extra expenditure on freight etc as the port is
at quite a distance from factory site. This along with the increased custom
duty has a multiplied effect in lowering the margins. Hence these are the
factors which are directly responsible for the losses which are mainly due
to inconsistent policies of the Govt. towards vanaspati industries.
OPERATIONAL AND FINANCIAL PERFORMANCE
Financial performance : 2003-2004 2002-2003
(Rs. in lacs)
Sales 78.62 103.41
EBIDTA (-) 130.01 (-) 102.69
During the year sales were 16838.759 MT including 10928.758 of Vanaspati &
5909.801 of Refind oil. There is 25% decline in sale volume of vanaspati &
50% decline sales volume of Refind oil due to lower demand factor. The
Company continued its efforts in encouraging its sales volume despite lower
demand and sales volume.
The sales is through dealers network who market both bulk & retail packs of
INTERNAL CONTROL SYSTEMS
The Company ensures existence of adequate internal control through
documented policy and procedures to be followed by the executives at
various levels in the organization. While operating managers ensure
compliance within their areas, internal audit carries out audit test on the
selected samples and report noncompliance weaknesses, if any, through
internal audit reports of the respective Department.
With the objective of improving the systems and removing bottlenecks, if
any, periodic systems review is carried out and Policies and Procedure
Manuals are continually reviewed and amended
Opportunities and threats
Economic liberation, rapid urbanisation , rising consumer awareness,
attitudes habits and their prosperity has made the market more competitive.
Besides maintaining the quality standards, company has to ensure the
quantitative terms of the sale and the fluctuating market of imported oils
along with the quite often changing Government policies in terms of custom
duty continue to worry the management including other factors.
Risks & Concerns
Basically the vanaspati industry and Government has to work hand in for the
growth of the industry as till today due to unsynchronized Development (in
Government policies) and radical changes in duty structure, the industry
despite its ample sqope of developments is not able to grow.
The report may contain certain statements that the Company believes are, or
may be considered to be "forward looking statements" that describe our
objectives, plants or goals. All these forward looking statements are
subject to certain risks and uncertainties, including but not limited to,
Government action, economic development, risks inherent in the Companys
growth strategy and other factors that could cause the actual results to
differ materially from those contemplated by the relevant forward looking
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