Empee Sugars & Chemicals Ltd Management Discussions.

Industry Scenario:

India is the world s second-biggest sugar producer and largest consumer next to Brazil. This industry is suffering consecutively for the last six years due to glut in production of sugar with low prices. The scenario during the year 2015-16 is reversed due to looking up prices at about Rs.30 per kg of Sugar. It has been forecasted that in the next five years, the sugar industry is expected to perform better due to growing sugar consumption, better prices and government policies. In India, the sugar production upto March 31, 2016 stood at 23.7 million tonnes, with a drop of 1.1 million tonnes less than last year. The welcome sign is that lower production along with exports brought down the closing stocks to around 7.6 million MT in 2016 from around 9.5 million MT in 2015 which is an advantage in realization of revenues for few corporates. By and large the sugar production in Tamil Nadu shall remain same during the year 2016-17. As industry is under stress, there has been a steady increase in the Fair and Remunerative Price, without any corresponding increase in the sale price of sugar. For a recovery of 9.5% per ton, the FRP has continued to rise from Rs.2100 in 2013-14 to Rs.2200 for 2014-15 to Rs.2300 per tonne for 2015-16. But for SY 2016-17, the Government has committed to continue with the FRP of Rs.2300 per ton. Further the Central Government announced a production subsidy of Rs.45 per metric ton of cane, subject to certain conditions by sugar mills, pegging the effective cane price at Rs.2255/- MT for a recovery of 9.50%. These factors shall decide the future prospects of sugar industry in our country.

Segment wise performance:

As reported in the Boards Report the Company has been registered as a sick Company with BIFR vide its orders dated 24.11.2014. However the segments of businesses ie.Sugar, IAP and Power were operational at minimum level during the year under review. The Sugar segment achieved a sales turnover of Rs.3440.34lacs while the IAP Rs.1836.08 lacs and Power Rs.13.40lacs.

The sugar division incurred a loss of Rs.2680.31lacs before interest and taxes, IAP division earned a Profit of Rs.72.18 lacs before interest and taxes and Power division incurred a loss of Rs.1535.78 lacs before interest and taxes. During the year under review, the Sugar unit at Ambasamudram did not function due to non-availability of sugar cane as repeatedly stated in the previous annual reports. Consequent to nonfunctioning of Sugar Plant at Ambasamudram, the 50MW power plant had to be shut down for want of basic raw material bagasse and also due to lack of working capital facilities from Banks, alternate fuel, coal could not be bought to run the power plant.

Internal control systems:

The company has a well-established internal control system in the form of well-documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures, to ensure proper functioning of operations. Moreover, the company appointed an independent external internal auditors to periodically review and make continuous assessments of the adequacy and effectiveness of the internal control and systems.

The Board, Audit Committee and the Management review the findings and recommendations of the Internal Auditors and take corrective action, wherever necessary.

Financial performance

The details of financial performance and operational performance are mentioned in the Directors Report.

Cautionary statement :

Statements in this Report describing the Company s objectives, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. Important factors that could make a difference to the Company s operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company s principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts businesses 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 development, information or events or otherwise.