gujarat cypromet ltd Management discussions

GUJARAT CYPROMET LIMITED ANNUAL REPORT 2002-2003 MANAGEMENT DISCUSSION AND ANALYSIS Management Reports & Analysis: We have pleasure in submitting the management discussion and analysis report on the companys area of activities. We have attempted to include discussion and analysis on all matters to the extent relevant or within such limits that in our opinion are imposed by the companies own competitive position. The company completed the year with adverse financial and operating results in view of the recessionary trends in the Domestic & Global Markets and also the pressure on margins in certain product lines, coupled with substantial increases in raw material prices. On an Annualized basis, during the 9 months under review, when compared to the operational figures for the previous 15 months, the sales have decreased by 4.76% from Rs.5842.61 lacs to Rs.3338.91 lacs, and the operating profit before interest, depreciation and taxes has decreased from Rs. 107.88 lacs to Rs.(-) 331.60 lacs. Industry Structure & Development: The operations of your company are structured into three separate segments. (1) Manufacturing Sales (2) Reprocessing Sales (3) Trading Sales All these segments relate to the business of Metals & Metals Products, in the form of raw materials, semi finished & finished Goods. Details of capacity & Turn Over referred to in the notes to the accounts, are summarised as below: Segments Quantity in MT Sales Rs. in tars (1) Manufacturing Sales 903 656.67 (2) Trading/Reprocessing Sales 918 2564.99 Total 1821 3331.66 The figures of manufacturing sales also includes sales on conversion basis of Rs. 82.31 lacs. The figures of trading sales, includes safe of 491 MT of reprocessed goods amounting to Rs.1429.87 lacs. The Industry structure in the field of manufacturing of Copper & Copper Alloy products in India is spread wide, from minuscule to fairly large capacities, with products ranging from ingots/billets to semi finished items like tubes, rotted products, sheets and flats. While there is no direct co relation in term of size v/s profitability, oil existing manufacturers have worked out their own viable economic and product mix depending upon various factors ranging from the alloys handled to the group of customers services. In addition, in view of the large number alloys and the product groups each manufacturer has established their own specialty and growth areas. However, there are very few large scale and modern manufacturing capacities in the Country catering to the demand for sophisticated tube products, end your company today, as one of the finest Copper & Copper Alloy facility in the Country. The company today is a major supplier of condenser and Sugar Bross Tubes to power equipment manufacturers, Condenser & Heat Exchanger Manufactures, Sugar Mills & Sugar Equipment manufacturers in the country. The company proposes to stabilizes its product mix in their specific areas/customers, which con generate medium to high value addition and towards this end, it aims to be the leading producer of products such as condenser tubes, used in areas/applications like power, petrochemicals, refineries and ship building. On, an overall basis, the operations of the company ore substantially capital intensive, with raw material and power, constituting the larger proportion cost and increases in cost of any of these inputs, have a substantial bearing on the profitability of the operations. Access to working capital limits and continuous cash flows, are also an important aspect of the industry and can contribute to efficient procurement of raw materials. In addition to the quest for higher capacity utilisation, we also firmly recognise that customer satisfaction and relationship earned through good quality products and timely deliveries, is a key to our success. Quality has been built into products through appropriate manufacturing methods and the process adopted and continuous development in areas of quality are systematically followed. While the company is in process of obtaining certification under the ISO 9000 standards, currently, the manufacturing facility is approved by all the major Government and Domestic Quality Control Agencies. SWOT Analysis: Strengths: Operating in a value added segment with niche products, State of the Art Plant incorporating latest technology and fully integrated manufacturing facilities. Successful and rapid penetration in an extremely demanding and sophisticated market. Easy availability of raw material: Flexibility of manufacturing within a given product mix and ability to handle a large number of alloys. Weaknesses: Delay in implementation of Phase II, stagnating production of high value export oriented products. Fairly large level of borrowings and high cost of those debts. Working capital constraints leading to low capacity utilisation. Opportunities: Emerging overseas markets for sophisticated tube products and acceptability of Indian manufactured products in the International Market. Turn around in the domestic industry with substantial demand from core industries such as power, refineries, petro chemicals etc. New product lines in non-traditional applications providing marketing opportunities untapped till today. Emergence of new segments in the domestic market due to change in buying power and increasing quality consciousness, in areas such as Copper Tubes for plumbing. Threats: The raw material used by the company are commodities in nature and subject to continuous fluctuations in prices. Current prices of raw materials are of their highest in a decade and such levels will affect the demand of products as well as hamper utilization, in view of increased requirement of operating funds. Reduction of custom duties on metal products imported from SAARC Countries, leading to unremunerative prices for many product lines. Environment & Safety: We firmly believe that safe and healthy working conditions in factories and other premises arts as necessary and important as production, productivity and quality. Our policy requires conduct of activities in such a way as to take for most account of health and safety of oil concerned, besides conservation of natural resources and protection of the environment to the extent possible. Human Resources: We recognise that employees represent our greatest asset and potential. It is only through motivated, creative and business-minded employees that we can achieve our aims involvement, commitment, teamwork and continuous updating of skills and knowledge are integral to our objectives of advancing a highly professional, productive culture. Permanent employment totals 218 of which officers and staff account for 36, and workmen for the balance (last year 241 and 39 respectively). Outlook, Risk & Concerns: There are no further or typical areas of risks or concerns outside the usual course of business foreseeable of this time. Internal current systems are improving. Our team is committed to the Boards dictates on standards of conduct as well as good governance and exercise of due diligence, We have taken all care to diligently comply with all applicable lows and regulations. The overall financial performance is in line with and reflective of operational performance, liquidity constraints with customers still impose cash flow and interest burdens on the businesses. Our outlook continues to remain positive and we face challenges with sincerity. Our sincere thanks to all employees and teammates whose dedicated and hard work allowed level of operations/sales to be achieved. We are grateful to our Bankers and concerned authorities for their continued support, and to all our customers for their faith and confidence. We remain committed to fullest customer satisfaction. Cautionary Statement: Statements in the Managements Discussion & Analysis Report which seek to describe the Companys objectives, projections, estimates, expectations or predictions may be considered to be "forward-looking statements" within the meaning of applicable securities laws or regulations, Actual results could differ materially from any expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Companys markets, changes in Government regulations, tax regimes economic developments within India and countries with which the Company conducts business besides other factors, such as litigation and labour negotiations.