(Annexure IV to Directors Report)
The Management of Hindustan Organic Chemicals ltd (HOCL) presents its Analysis Report covering the Performance and Outlook of the Company. The Report contains business prospects and perspectives based on the current environment and strategic options to steer the Company through unforeseen and uncontrollable external factors.
The feed stock prices in India which is based on petroleum feed stock prices are significantly higher as compared to major exporting countries. The capability of chemical manufacturing units to earn a reasonable return has been largely affected by global competition and tightening of parameters like rationalized duty structure and strict quality controls. Moreover, the capacity of the domestic Industry is small as compared to the competitors abroad. The domestic manufacturers in Indian Industry are in a disadvantageous position with regard to overhead costs.
In order to prevent dumping and to reform the sector to enable it to meet global competition, active follow up is made with the Govt. of India for continuation of/levy of anti-dumping / safe guard duties as per WTO Guidelines.
HOCL Kochi unit is having INTEGRETED MANAGEMENT SYSTEM certification, comprising of ISO 9001-2015 (Quality Management System), ISO 14001-2018 (Environmental Management System) and ISO 45001-2018 (Occupational Health and Safety Management System). The certification is valid up to 19/11/2023, HOCL is in the process of implementing ISO 50001. All the products of HOCL are certified by BIS. KEY OPPORTUNITIES INCLUDE
Out of the 242 acre of colony land for sale to BPCL 85 acre was registered during the year and BPCL has recovered the loan principal amount in full, and balance amount was utilized to pay the salary dues of Kochi employees, and other statutory liabilities in Kochi Unit, two plants (Phenol and Hydrogen Peroxide plant) are operational.
The Kochi unit has started procuring LNG, instead of furnace oil as fuel in the Boiler and Hot oil unit which is environment friendly and also achieved savings in cost as well. The Kochi unit is also availing power purchase from utility trading companies to save on the cost of power.
KEY THREATS INCLUDE
Competition from imports for the main products Phenol and Acetone, continues even though petition has been filed for continuation of anti-dumping duty on imports from USA and Thailand and antidumping duty is in place from some other importing countries.
Volatility in raw material prices due to fluctuating crude prices, and inability of the domestic manufacturers to pass on the rising cost to the end consumer due to stiff un-remunerative prices at which imported materials are being sold SEGMENTWISE PERFORMANCE
The Company is primarily in the business of manufacture and sale of chemicals.
|Year ended 31/03/2021||Year ended 31/03/2020|
|Product Segment||Target MT||Actual MT||Percentage Achieved||Target MT||Actual MT||Percentage Achieved|
PRODUCT WISE PERFORMANCE (Production of Main Products)
|Name of Product||F.Y. 2020-21||F.Y 2019-20|
OUTLOOK AND INITIATIVES FOR THE CURRENT YEAR
There has been delay in transfer of balance land to BPCL, however, there has been progress in the initiative taken by the Company with State Government authorities to settle grievances of the local villagers, and the construction of Boundary wall by BPCL is in progress. It is expected that an early solution to the problem will be worked out with the help of Government authorities. The company is continuing efforts for sale of balance land at Rasayani. The NOC for sale of 7 acre of land at Panvel is awaited for the State Government.
SOME RISKS & CONCERNS.
• Competition from cheaper Imports of main product Phenol and Acetone.
• Volatility in raw material feed stock prices based on fluctuations in crude prices.
• Inability to pass on the increase in raw material cost to the consumers due to availability of imported finished product at cheaper prices.
• Huge investments required for revamp/replacement/modernization of the old plants.
• Sale of balance unencumbered land at Rasayani / Panvel after receipt of NOC from Government of Maharashtra.
• High interest costs, high employees remuneration.
INTERNAL CONTROL SYSTEMS & THE ADEQUACY
Internal controls are supported by Internal Audit and Management Reviews. Company ensures existence of adequate internal control through documented policy and procedures to be followed by the executives at various levels. The Management is keen on these issues and initiated various measures such as upgrading IT infrastructure, evaluating & implementing Tally ERP software, web- based application and establishing connectivity amongst manufacturing unit and branch offices for effective & proactive services and business benefits.
With the objective of improving the systems and removing bottlenecks, systems review is carried out and policies and procedure manuals are amended. HOCL Kochi unit is having INTEGRETED MANAGEMENT SYSTEM certification, comprising of ISO 90012015 (Quality Management System), ISO 14001-2018 (Environmental Management System) and ISO 45001-2018 (Occupational Health and Safety Management System). The certification is valid up to 19/11/2023, HOCL is in the process of implementing ISO 50001. All the products of HOCL are certified by BIS.
REVIEW OF FINANCIAL PERFORMANCE:
During the year 2020-21, the company has achieved a Gross Income of Rs.430.85 crore registering an increase of 33.78 % as against the Previous Year Gross Income of Rs.322.05 Crore. The Company has earned a Net Profit before Tax of Rs.15.47 Crore during the year as against Net loss of Rs.94.75 crore incurred during the previous year.
In Kochi Unit, two plants (Phenol and Hydrogen plant) are operational. The Phenol Plant at Kochi unit achieved a capacity utilization of 90% during the year. The Company continued to effect savings in utility cost by resorting to purchase of power from utility trading companies. The Company is using LNG in Boiler and Hot oil units which is environment friendly and also cheaper than the furnace oil that was being used earlier.
INFORMATION TECHNOLOGY - 2020-21
Company has effective information systems for core business areas. However, company has envisaged a plan to meet changing demands keeping in view the technological changes and the way information & communication technology offering innovative services suiting to every business need. Company has implemented new Tally ERP software to replace the SAP system to be cost effective and suiting to the requirement of the Company. In house development of software for reporting analysis data, statutory forms etc.
Management ensures continual effort in the ever-changing technological environment, for improving and meeting with requirement like data security, information available, transparency and accuracy. Company is using open tendering / e-Tendering solution being provided by National Informatics Centre (NIC). Company has also registered with GEM Government platforms for procurement and TREDs for payment to MSMEs. Company is also following various guidelines of procurement through MSMEs.
The operations of the Company had to be scaled down during the last week of the year affecting the production of all the products. The price of our main product Phenol has come down due to the nationwide restriction on the manufacturing activities.
During the current financial year (2020-21) operation of the Company was scaled down for three weeks during the month of April, 2020. The Company was in lock down for 24 days and thereby resulting in a decrease in production of Phenol, Acetone, Hydrogen Peroxide. Consequently, there was loss of production and a reduction in turnover due to loss of sale and also reduction in prices. The Company was quick in restoring the operations by ensuring health, safety and well-being of its employees.
COVID-19 has affected all the sectors of industry and commerce like logistics, auto, drugs, pharmaceuticals and electronic goods where our products are used. The impact of COVID-19 may lead to decline in demand or prices, suspend or significantly reduce operations of factory and affect movement of interstate transportation of goods etc.
As per our current assessment, no significant impact on tangible assets, intangible assets, trade receivables, investments and other financial assets is expected, and we continue to monitor the changes in future economic conditions. The Management does not see any risk in the ability to continue as a going concern and meeting its liabilities as and when they fall due. However, the actual impact of Covid-19 on the Companys financial statements may differ from what is estimated.
Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the chemical industry - global or domestic or both, significant changes in political and economic environment in India or key markets abroad, tax laws, litigation, manpower cost, exchange rate fluctuations, interest and other costs.
|For and on behalf of the Board of Hindustan Organic Chemicals Ltd.|
|Place : CBD Belapur||(S.B.Bhide)|
|Date : 11/06/2021||Chairman and Managing Director|