Indian Aluminium Company Ltd Directors Report

INDIAN ALUMINIUM COMPANY LIMITED ANNUAL REPORT 2006-2007 DIRECTORS REPORT Dear Shareholders Your Directors would like to present the 69th Annual Report, together with the audited accounts for the financial year April 2006 to March 2007. Financial Results: (Rs. Thousand) April 2006- April 2005- March 2007 March 2006 Sales and Operating Revenues 876,001 729,664 Of which exports 102,727 101,457 Operating profit (profit before Depreciation, 10,142 19,595 Interest and Tax) Interest 3,615 2,570 Depreciation 36,066 34,622 Profit/(Loss) before tax (29,539) (17,597) Tax - Current NIL 4,345 - Deferred (5,443) (9,166) - Fringe Benefit 468 551 Profit/(Loss) after tax (24,564) (13,327) Sales and Operating Revenues stood at Rs.876,001 thousand (previous year Rs.729,664 thousand). Net Loss was Rs.24,564 thousand (previous year Net Loss Rs.13,327 thousand). Dividend: Since your Company has not made any profit, your Directors have not recommended any dividend. Corporate Developments: Hindalco Industries Ltd., the holding company of Indal, holds approximately 97.06% of the share capital of the Company, as on 31 March 2007. Operational Review: Your Company has consistently focussed on value-added products and made inroads into new markets. The major highlights: * With increased demand in the Pharma sector, production volumes grew at 2942 tonnes during FY07 as against 2451 tonnes in FY06, registering a growth of 20%. * Your Company widened its customer base by developing new customers in the export and domestic markets. * Overall delivery performance improved from 90% in 2005-06 to over 94%. * Customer complaint settlement time reduced significantly from 65 days in 2005-06 to 50 days in 2006-07. Programmes on 5S - Housekeeping and Good Manufacturing Practice (GMP) were launched during the year to meet the stringent quality standards of pharma customers. Engineering Achievements: Major Engineering activities completed include: * Installation of Bending System in the Rolling Mill with reversing and separating operations, thereby improving foil quality in terms of shape. * Complete revamp of Furnace-1 which has helped reduce energy consumption. * Installation of 13 Nos. Turbo Ventilators on the Poly Extruder machine to improve working conditions on the shop floor. * New Dry Air System for the Foil Rolling Mill which prevents moisture getting into the foil, and eliminates the possibility of any corrosion. * Procurement of New Chill Roll for the Poly Extruder. * Installation of New DC Drive in the Paper Laminator machine. Corporate Governance: Your Company re-affirms its commitment to the standards of corporate governance. Human Resource Development and Industrial Relations: Your Company recognises the value of people as its most valuable asset and believes that your Companys employees are central to its sustainable success. Industrial Relations have remained cordial throughout the year with good co-operation from all Operatives in improving the overall performance of the Plant. The plant has remained accident free over the last few years including 2006-07. It has achieved 2.64 million accident free man-hours up to 31 March 2007. Corporate Social Responsibility: Your Company continues to strengthen its efforts towards sustainable development with new initiatives and consistent improvements in the economic, environmental and social aspects of the business. In line with the Social Vision of the Aditya Birla Group your Company has played an active role in various social activities for making a difference to the surrounding community. Quality, Environment Protection and Pollution Control: Your Company was presented the Appreciation Award from the National Safety Council for obtaining OHSAS:18001 (1999) Certification. Surveillance audit for ISO: 9001 (2000), ISO 14001 (1996) and OHSAS: 18001 Systems certifications were carried out successfully by the certification body BVQI. Investor Services: In terms of the provisions of Section 205C of the Companies Act, 1956, your Company transferred an amount of Rs.21,27,613.00 to the Investor Education and Protection Fund, relating to amounts lying as unclaimed dividend for more than seven years from the due date. Directors: Mr. A.K. Agarwala and Mr. A.L. Mudaliar retire by rotation from the Board in accordance with Article 117 of the Articles of Association of the Company and are eligible for re-appointment. Board of Directors: Your Companys Board includes six Non-Executive Directors, of which, three Directors are independent directors. The Board met four times during the year. Audit Committee: Your Company has an audit committee at the Board level. The Committee acts as a link between the management, the statutory auditors and the Board of Directors and oversees die financial reporting process. All members of the Committee are Non-Executive Directors. The Chairman is an independent director with sound financial and accounting knowledge. The details of the composition of the Committee are as follows: Name of Director Nature of Director Audit Committee Meetings Held Attended Mr. P.K. Choksey, Chairman Independent Director 2 2 Mr. A.K. Agarwala, Member Non-executive Director 2 2 Mr. A.L. Mudaliar, Member Independent Director 2 1 Mr. B.L. Shah, Member Non-executive Director 2 2 The Audit Committee met twice, on 28 April 2006 and 27 November 2006. The Committee recommended the approval and adoption of the annual accounts for the financial year 2005-06 and reviewed the Accounts for the seven months ended 31 October 2006. Auditors: At the Annual General Meeting held on 11 July 2006, the members had appointed Messrs. Price Waterhouse, Chartered Accountants, as auditors of your Company, at a remuneration as may be mutually agreed upon between the Board of Directors and the Auditors. Accordingly, it was agreed to pay Rs.4,50,000/ to Messrs. Price Waterhouse as auditors of the Company from the conclusion of the sixty-eighth Annual General Meeting to the conclusion of the next Annual General Meeting. Messrs. Price Waterhouse, being eligible, offer themselves for re-appointment. Subsidiaries: The Company has no subsidiary company. Appendices: Energy Conservation and Foreign Exchange Earnings and Outgo, details are given in Appendix-I. Information in terms of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975-NIL. Disclosures in compliance with Accounting Standard-18 on Related Party Disclosures form a part of this Annual Report. Directors Responsibility Statement: The Audited Accounts containing Financial Statements for the financial year ended 31 March 2007 are in full conformity with the requirements of the Companies Act, 1956. Your Directors believe that the Financial Statements reflect fairly, the form and substance of transactions carried out during the year and reasonably present your Companys financial condition and results of operations. Your Directors further confirm that: (i) In the presentation of the annual accounts, applicable accounting standards have been followed; (ii) The accounting policies have been consistently applied and reasonable, prudent judgement and estimates are made so as to give a true and fair view of the state of affairs of your Company as at 31 March 2007 and of the profit for the financial year ended 31 March 2007; (iii) 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 safeguarding the assets of your Company and for preventing and detecting frauds and other irregularities; and (iv) The annual accounts of your Company have been prepared on a going concern basis. Appreciation: Your Directors place on record their deep appreciation of the assistance and support provided by the financial institutions and banks associated with your Company. Your Directors recognise the commitment and contribution of your Companys employees. Your involvement as shareholders is greatly valued. For and on behalf of the Board Place: Mumbai Askaran Agarwala Dated: 5th May, 2007 Chairman A. Conservation of Energy: * As part of Energy savings programme, kilowatt hours per tonne consumed was lower at 2498 kWhrs/tonne against 2916 kWhrs/tonne in the previous year. B. Technology: * Please refer to Form-B. Appendix-I: C. Foreign Exchange Earnings and Outgo: Foil exported from Kollur was marginally lower at 440 tonnes (FY06 449 tonnes) on account of vacating export capacities in favour of more remunerative domestic loads. The focus was on export of Light Gauge Foil, Lidding Foil and Plain Pharmaceutical Foil. The major markets serviced were Syria, Lebanon, Dubai, Turkey and Iran. New customers were successfully developed for Light Gauge and Pharmaceutical Foil in Saudi Arabia and Sri Lanka. We expect regular orders from these customers. Going forward, the main thrust will remain on exporting Light Gauge, Lidding and Pharmaceutical foil to these countries. Our target is to substantially increase volumes. Foreign Exchange used and earned: 2006-2007 2005-2006 Rs. Thousand Rs. Thousand Earnings on account of Export 102,727 101,457 Outgo on account of Imports, Commission 15,291 36,215 Net foreign exchange earned/(spent) 87,436 65,242 FORM-A Disclosure of particulars with respect to conservation of energy: A. Power & Fuel Consumption: 2006-2007 2005-2006 1. Electricity: a) Purchased (For Production): Units - 000 kWh 7189 7277 Total Rs. million 26.21 29.5 Rate Rs./kWh 3.65 4.05 b) Own Generation: i) Through Diesel Generator: Unit - 000 kWh 160.4 26.8 Total Rs. million 1.88 0.24 Rate Rs./kWh 11.70 8.85 2. Others: a) Low Sulphur Heavy Stock (LSHS) - - Quantity - tonne Total Rs. million Cost Rs./tonne (b) High Speed Diesel (HSD): Quantity - kilo litre 56.77 9.64 Total Rs. million 1.88 0.24 Cost Rs./kilo litre 33.07 24.62 (c) Light Diesel Oil (LDO): Quantity - kilo litre - - Total Rs. million Cost Rs./kilo litre Power consumption (kWh/t) 2498 2916 B. Consumption per unit of production: Products Electricity Fuel Oil kWh/tonne Kg/tonne 2006-07 2005-06 2006-07 2005-06 Foil & foil laminates 2498 2916 16.07 3.3 FORM-B Disclosure of particulars with respect to technology absorption: Research and Development (R&D): 1. Specific areas in which R&D carried out by the Company: a) Roll Grinding Practices: To improve the overall productivity of the Rolling mill, speed improvement was brought about by experimenting with various grit of grinding wheels and grinding practices. b) Modification in Annealing practices: To improve the quality of light gauge foil, annealing practices were modified after carrying out extensive research work. The annealing temperature and cycle time were experimented to achieve better machinability of the foil. c) Coolant Oil Hygiene: Acceptable levels of Contamination percentage were established through experimentation to avoid excess, oil carry over in the foil. 2. Benefits derived as a result of the above R&D: a) Productivity in the rolling mill improved by over 5% consequent to the changes made in the roll grinding practices. b) Improved quality of Blister RGF. No major rejections on account of excess oil carry over on the surface of the foil. c) Improved quality of light gauge foil. Customer satisfaction rating from the major customers improved from 76% to 86%. 3. Future plan of action: Developmental work is underway to reduce the cost of Blister coating without affecting quality. 4. Expenditure on R&D: Expenditure during the financial year was 1,75,000/-approximately. Technology - absorption, adaptation & innovation: Technology support was obtained from Hindalco Industries Limited Corporate Technology Cell for improving the rolling productivity and in the improvement of Light Gauge Foil quality.