Hubergroup India Pvt Ltd Directors Report

MICRO INKS LIMITED ANNUAL REPORT 2011 DIRECTORS REPORT The Directors have pleasure in presenting the 21st Annual Report of the Company and Audited Accounts for the accounting year ended on December 31, 2011. Financial Highlights: (Rs. in million) 31/12/2011 31/12/2010 Sales/Income from Operations Domestic (Net of Excise Duty) 9,079.60 7,900.24 Exports 11,896.03 9,294.68 Other Operating Income 99.88 102.03 PBDIT 2,979.97 2,443.37 Provision for Taxation 653.00 600.00 Deferred Tax Credit (14.23) (15.72) PAT 1,368.39 1,418.40 Balance Brought Forward 2,760.13 2,015.17 Profit Available for Appropriation 4,128.52 3,433.57 Appropriations Proposed Equity Dividend 149.23 149.23 Tax on Proposed Equity Dividend 24.79 24.21 Transfer to General Reserve 150.00 500.00 Surplus Carried to Balance Sheet 3,804.50 2,760.13 Dividend: The Board of Directors has recommended dividend of Rs.6/- per share (@ 60%) on 24,872,061 (Previous year, Rs. 6/- per share (@ 60%) on 24,871,941) Equity Shares of Rs. 10/- each fully paid-up, aggregating to Rs. 174.02 million including Dividend Tax of Rs.24.79 million. The dividend for the accounting year ended December 31, 2011 will not be taxable in the hands of the Members. Performance Review: In the year 2011, the Company achieved a milestone turnover of Rs. 21,965 million and Consolidated turnover of Rs. 25,958 million. Consolidated Net Sales grew by 28% and stood at Rs. 25,069 million led by 15% growth in domestic market, 2% (in dollar terms) growth in US market, 18% growth in Rest of the World market (excluding USA, AUS, NZ, hubergroup and India), 30% growth in revenue from hubergroup worldwide. Domestic Sales: The Domestic Net Sales and Other Operating Income grew by 15% at Rs. 9,179 million. Your Company continues to maintain its leadership position in the Indian Printing Inks market due to superior products and advantage of hubergroup superior technology. Exports: Consolidated International Sales stood at Rs. 15,890 million contributing 63% of total Net Sales and Other Operating Income. The sales of subsidiaries: US subsidiary stood at US$ 84 million, Australia stood at AU$ 43 million and New Zealand stood at NZ$ 15 million for the year compared to sales of US$ 82 million, AUS 33 Million and NZ$ 15 Million in the previous year, respectively. Companys sales to Rest of the World stood at Rs. 1,395 million for the year compared to Rs. 1,177 million in the previous year. Profitability: During the year, the Companys consolidated EBIDTA stood at Rs. 3,192 million compared to Rs. 2,576 million for the previous year. The EBIDTA was higher due to improvements in manufacturing process and better price realisations. The Net Profits at consolidated level was lower by Rs.64 million and stood at Rs. 1,267 million compared to Net Profit of Rs.1,331 million for the previous year due to loss of US Subsidiary. Finance: During the year, the consolidated interest was higher by Rs. 535 Million and stood at Rs. 612 million compared to Rs. 77 million for the previous year, mainly due to exchange loss of Rs. 483 million on revaluation on foreign currency loans in current year. Overall consolidated debt increased by 724 Million and stood at Rs. 3,816 Million as on December 31, 2011. Sales to capita! employed at 2.0 times as compared to 1.9 times in previous year and Sales to Net Working Capital remained constant at 3.35 times. Outlook: Indian Economy has performed relatively well on the backdrop of weak global economic environment. On a continuing trend, the growth rate of the company has been positive in the current year as well. However, the global economy continues to be on a weak trend, especially with Europe and North America performing flat to negative growth rate and the Middle East with political upheavals, the industry may face a flat growth rate in these regions. The improvements are likely to be expected by end of the year with no significant upturn. The silver lining is in Asian and Australian markets, which shows a favorable growth rate. The Company while supporting the markets in Europe and NAFTA is focusing on the Asian and Australian markets to maintain its growth path. Consolidation of Accounts: The audited Consolidated Accounts and Cash Flow Statements, comprising of the Company and its all Subsidiary Companies appear in this Annual Report together with the Auditors Report on the Consolidated Accounts. The Consolidated Accounts have been prepared in accordance with Accounting Standard 21 prescribed by the Institute of Chartered Accountants of India. The Government of India, Ministry of Company Affairs, New Delhi, vide its circular No.2/2011 dated February 8, 2011 has granted a general exemption under Section 212 of the Companies Act, 1956, in relation to the subsidiary to all the Companies, which fulfills the conditions specified in the circular. Accordingly, Company has obtained consent of Board of Directors of the Company and furnished the requisite information relating to all subsidiaries of the Company in the Annual Report for the year ended December 31, 2011. However if any Member of the Company so desires, the Company will make available copies of full accounts of the Subsidiaries of the Company. The information / statement pursuant to aforesaid circular and Section 212 of the Companies Act, 1956, is annexed to this Annual Report. Corporate Social Responsibility: Your Company continued to contribute to society through donations and community development initiatives. Insurance: The Company has taken adequate insurance to cover risk to its assets, profits and standing charges as well as employees. It has also taken cover against liability to public under Public Liability Insurance Act, 1991. The above covers have been taken based on internal risk study. Directors Responsibility: Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that to the best of their knowledge and belief: 1. in the preparation of the annual accounts, the applicable accounting standards have been followed; 2. appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at December 31. 2011 and for the profit and loss account for the year ended on that date; 3. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities and 4. The annual accounts have been prepared on a going concern basis. Energy, Technology and Foreign Exchange: As required under Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo is annexed. Employees: The Company acknowledges the commitment and contribution of all its employees to the Companys growth. Our industrial relations continued to be excellent. Information as per amended Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the Report and the Accounts are being sent to all the shareholders, excluding the statement of particulars under Section 217(2A). Any shareholder, interested in obtaining a copy of this statement, may write to the Company Secretary at the Registered Office of the Company. Directors: in accordance with the Companies Act, 1956, and the Articles of Association of the Company, Mr. Anjum Bilakhia, Mr. M. L. Bhakta and Prof. Pradip Khandwalla retire by rotation and are eligible for re-appointment. These appointments form part of the Notice of the 21st Annual General Meeting and the Resolutions are recommended for your approval. Auditors: Messrs Deloitte Haskins & Sells, Chartered Accountants, the Auditors of the Company will retire at the conclusion of the 21s Annual General Meeting and offer themselves for re-appointment. A letter from them confirming that, if they are re-appointed as the Auditors of the Company, such appointment will be in accordance with the provisions of Section 224 (1B) of the Companies Act, 1956 and they are not disqualified in terms of Section 226 of the Companies Act, 1956, from being appointed as the Statutory Auditors of the Company, has been received. Acknowledgment: The Board of Directors takes this opportunity to express its sincere appreciation for the continued support and confidence received from the Companys customers, distributors, suppliers, bankers, shareholders and other business associates. Your Directors places on record their deep appreciation of the dedicated efforts and contribution of the employees at all levels and look forward to their continued support in the future as well. For and on Behalf of the Board Place: Vapi Anjum Bilakhia Date : February 25, 2012 Chairman ANNEXURE TO THE DIRECTORS REPORT Statement pursuant to Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, forming part of the Directors Report Conservation of Energy The Companys operations do not involve substantial consumption of energy in comparison to the cost of production. Wherever possible, energy conservation measures have been implemented. Total energy consumption is as per Form-A and forms part of the report. FORM - A CONSERVATION OF ENERGY FOR THE ACCOUNTING PERIOD ENDED DECEMBER 31, 2011 (A) Power and Fuel Consumption Particulars Units 2011 2010 1. Electricity Purchased from Electricity Boards 1. KWH Units (Million) 34.72 27.08 Total Amounts Rs. (Million) 189.24 131.18 Average Rate Rs./Unit 5.45 4.84 2. Natural Gas SCM. (Million) 24.00 27.62 Total Amount Rs. (Million) 529.91 466.83 Average rate Rs./(Unit) 22.08 16.90 3. High Speed Diesel Ltrs. (Million) 0.49 0.49 Total Amount Rs. (Million) 18.86 18.07 Average rate Rs./(Unit) 38.46 36.54 4. Furnace Oil Kgs. (Million) 1.17 1.27 Total Amount Rs. (Million) 38.52 30.52 Average Rate Rs./(Unit) 32.81 24.10 5. Solid Biomass Briquettes Kgs. (Million) 0.97 1.11 Total Amount Rs. (Million) 4.24 4.52 Average Rate Rs./(Unit) 4.38 4.08 6. Light Diesel Oil Kgs. (Million) - 0.003 Total Amount Rs. (Million) - 0.09 Average Rate Rs./(Unit) - 29.62 (B) Consumption per Unit of Production: Electricity } Since the Company manufactures different types of Natural Gas } products, it is not practicable to give consumption HSD } per unit of production. Furnace oil } FORM - B A. RESEARCH AND DEVELOPMENT 1. SPECIFIC AREAS IN WHICH R&D EFFORTS HAVE BEEN PUT IN BY THE COMPANY For development of: * Specialty esters for low migration inks * Specialty UV oligomer for low migration * Special PU resin for liquid inks to solve the problem of spinning * Specialty phenolic resins * Additional pigments and pigment concentrates for offset inks * Hard dry offset ink for difficult substrates * Oil based overprint varnishes * Systematic product basket for UV OPV * Systematic product basket for UV inks for paper, plastic and Newsprint including the pigment concentrates for these applications * Mineral oil free CS inks * Product basket for fountain solutions 2. BENEFITS DERIVED AS A RESULT OF R & D Many of the above developments will enhance the competitiveness of the company and will improve the quality of existing products. New range of products will enhance the quality of UV & other inks, which will further help in increasing the present market share. 3. FUTURE PLAN OF ACTION The Companys R&D is working continuously for the development of new products, processes and improved formulations to give high quality performance inks for different applications to customers worldwide. With the technology support from hubergroup, the Company is continuously developing new products and process to offer superior quality inks. 4. EXPENDITURE ON R&D The Company has set up a most modern R&D Center. It has also imported various sophisticated equipment for R&D and Quality Control System. During the year, the Company has incurred, on R&D Facilities: (a) Capital expenditure of Rs. 2.20 Million, (b) Recurring expenditure of Rs. 55.64 Million. (c) Total Expenditure Rs. 57.84 Million and (d) Total R&D expenditure as a percentage to total turnover was 0.27%. B. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION 1. THE EFFORTS MADE TOWARDS TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION The Company has successfully developed the technology and products listed in A1 above and the technology have been successfully implemented. 2. BENEFITS DERIVED AS A RESULT OF ABOVE EFFORTS As a result of the aforesaid efforts the Company has been able to expand its business reach apart form becoming more competitive and will be in a position to offer significantly superior products to its customers. Some of the inks will provide import substitute, which will be an added advantage to the country also. 3. IN CASE OF IMPORTED TECHNOLOGY (IMPORTED DURING THE LAST FIVE YEARS. RECKONED FROM THE BEGINNING OF THE FINANCIAL YEAR) THE FOLLOWING INFORMATION MAY BE FURNISHED Technology imported HIT Technology Year of Import 2007 Has technology been fully absorbed? Yes If not fully absorbed, areas where this has not taken place, reasons thereof and future plan of actions N.A. C. FOREIGN EXCHANGE EARNINGS AND OUTGO 1. ACTIVITIES RELATING TO EXPORTS, INITIATIVES TAKEN TO INCREASE EXPORTS, DEVELOPMENT OF NEW EXPORT MARKETS FOR PRODUCTS AND SERVICES AND EXPORT PLANS As mentioned in the Directors Report. 2.(1) Total Foreign Exchange Earned Rs.10,930.64 Million (FOB) (2) Total Foreign Exchange Used Rs.6,796.20 Million For and on Behalf of the Board Place: Vapi Anjum Bilakhia Date : February 25, 2012 Chairman