Jhagadia Copper Ltd Directors Report

JHAGADIA COPPER LIMITED ANNUAL REPORT 2008-2009 DIRECTORS REPORT Your Directors have pleasure in placing before you the 45th Annual Report together with Audited Accounts for the year ended on 31st March, 2009. 1. Results: Your companys performance during the year ended on 31st March, 2009 is summarized below. Rs. Lacs Rs. Lacs 2008-09 2006-08 [1st April, 2008 to [1st October, 2006 31st March, 2009] to 31st March, 2008] Net Sales 35852.03 35501.82 Job Work Income - Tolling 238.22 1146.66 Other Income 332.45 748.89 Total Expenditure (43701.79) (42243.22) Profit / (Loss) before Interest, Depreciation & Tax (7279.09) (4845.85) Interest and Finance Charges 11213.42 11268.11 Profit/ (Loss) before Depreciation & Tax (18492.51) (16113.96) Depreciation 7246.06 10876.30 Profit / (Loss) before Tax (25738.57) (26990.26) Provision for Tax 47.34 11.52 Net Profit / (Loss) (25785.91) (27001.78) 2. Operational Highlights: During the year, the Smelter and Refinery continued to operate successfully with various imported raw materials. The operation of the entire plant was stable with increased production and cost efficiencies. During the year, Kaldo Furnace was run with Direct Revert Charging System with reduced cycle time and production costs. The Refinery was operated at 98.08% current and 96.09% time efficiencies respectively at par with world class Refineries. During the year, 12,675 MT copper cathodes conforming to LME Grade A specifications were produced from the raw materials purchased and procured on tolling basis, against production of 9,913 MT copper cathodes for the same period in the pervious year. During the year, the total sale of copper cathodes was 11,202 MT of the value of RS. 305 crores including export of 8641 MT. The aggregate value of exports done by the company in last 4 years have exceeded Rs. 852 crores. During the year, the plant was operated at 25.3% capacity mainly because of inadequacy of working capital and adverse market conditions due to lower treatment/refining charges on medium grade and lower discount on high grade materials. The low capacity utilization has adversely affected the margins. 3. Transfer of long term financial assistance to Asset Reconstruction Company (India) Limited: During the year, IFCI Limited and State Bank of India have transferred outstandings of their long term financial assistance extended to the company to Asset Reconstruction Company (India) Limited (ARCIL). As on 31st March, 2009 ARCIL was holding 88.22% of the outstanding of the long term financial assistance extended to the company. 4. Dividend: Your Directors are unable to recommend any dividend on both equity shares and preference shares in view of the losses incurred during the year. 5. Environment, Safety and Health: During the year, the emphasis was continued on maintaining the highest standards of environment management for carrying out operations. During the year, the safety and health continued to be one of the top priorities of the company and the reportable accident frequency rate has remained NIL. During the year, the efforts in maintaining highest standards of environment, safety and health have been acknowledged by continuing ISO 9001: 2000, ISO 14001: 2004 and OHSAS 18001: 2007 certifications by DNV. 6. Management Discussions and Analysis: The Management Discussions and Analysis Report is annexed as Annexure-1 to this Report. 7. Corporate Governance: As per Clause 49 of Listing Agreement with Bombay Stock Exchange Limited, the Corporate Governance Report is annexed to and forms part of this Report. 8. Employee Stock Options Scheme: The details of stock options granted, outstanding and other relevant details are provided in Annexure-2 and forms part of this Report. 9. Insurance: The company has made arrangements for adequately insuring its insurable interests. 10. Directors: During the year, Shri P.P. Vora resigned as Director of the company and Chairman of the Board. Shri R.K. Sukhdevsinhji, Director has taken over as Chairman of the Board w.e.f. 25th April, 2009 in place of Shri P.P. Vora. After close of the year Shri PParvathisem, Director resigned as Director of the company. During the year, IFCI Limited nominated Shri R.P.Singh as its nominee director in place of Shri Mahendra Kumar Sharma. The nomination of Shri R.P Singh was subsequently withdrawn by IFCI Limited on transfer of its outstanding of long term loans to Asset Reconstruction Company (India) Limited. During the year, Shri Rajendra Mittal resigned and ceased as Managing Director & CEO of the company w.e.f. 2rd January, 2009. During the year, Shri Om Prakash Chugh has been appointed as Additional Director and Managing Directors & CEO of the company w.e.f. 9th February 2009. Shri Chugh holds office as Additional Director upto the date of next annual general meeting of the company pursuant to Article 95 of the Articles of Association of the company. The company has received the notice under Section 257 of the Companies Act, 1956 from a member proposing candidature of Shri Chugh as Director of the company. At the ensuing Annual General Meeting, in accordance with the provisions of Section 259 of the Companies Act, 1956 and Article 107 of the Articles of Association of the company, Shri R.K. Sukhdevsinhji, Director retires by rotation at the ensuing Annual General-Meeting is eligible for reappointment. Your Directors place on record their profound gratitude for the valuable contributions made by Shri P.P. Vora during his tenure as Chairman of the company. Your Directors also place on record their appreciation for the valuable contributions made by the outgoing Directors. 11. Auditors: M/s N.M. Raiji & Co., Chartered Accountants, Statutory Auditors of the company shall retire at the ensuing Annual General Meeting and being eligible have offered themselves for reappointment. Further, as required under Section 224 of the Companies Act, 1956 a certificate from M/s N.M. Raiji & Co., Chartered Accountants has been obtained that their re- appointment as Statutory Auditors, if made, would be in conformity with the limits prescribed in the said Section. Your Directors propose them for reappointment as Statutory Auditors of the company. 12. Auditors Report: In respect of Auditors qualification as per Paragraph 4 of theAuditors Report, the Directors are of the view that impairment of assets have not been worked out as restructuring of business is contemplated, which is likely to impact the value of fixed assets and carry forward losses. On completion of the restructuring exercise, the management will be in the position to ascertain the impairment of assets. 13. Energy, Technology and Foreign Exchange: The details as required under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are given in Annexure-3 to this Report. 14. Particulars of employees: The particulars of the employees as required under Section 217 of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended are set out in the Annexure-4 to this Report. 15. Directors Responsibility Statement: Pursuant to the provisions contained in Section 217(2AA) of the Companies Act, 1956, the Directors of your company confirm that subject to the Auditors Qualification in respect of impairment of assets: i) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; ii) they have, in the selection of the accounting policies, consulted statutory auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the year i.e. 31st March, 2009. iii) they have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding assets of the company and for preventing and detecting fraud and other irregularities; iv) they have prepared the accounts on a going concern basis. 16. Personnel/Industrial Relations: During the year, the personnel and industrial relations with the employees remained cordial in all respects. 17. Acknowledgments: Your Directors place on record their appreciation and thanks to all the financial institutions and banks, Asset Reconstruction Company (India) Limited, the State Trading Corporation of India Limited, Central and State Governments and Local Authorities and all stakeholders for their continued support in the working of your company. Your Directors also extend their wholehearted thanks to entire JCL team and its associates. For and on behalf of the Board Place : Mumbai R.K. Sukhdevsinhji Date : 29th July, 2009 Chairman Annexure-1 to the Directors Report MANAGEMENT DISCUSSION AND ANALYSIS Overview: During the year, the plant has operated at 25.30% capacity (peaked to 34.46%) with 12,675 MT copper cathodes production of consistent quality conforming to the LME Grade A specifications. During the year, the flexibility of the plant in processing various types of raw materials continued to be demonstrated by processing reverts; concentrates with high insolubles, irony copper, copper dross, copper cake, blister and other copper bearing raw materials. During the year, the sale of copper cathodes continued at par with the market premium, although not yet registered with LME. Absorption of Technology The company has successfully absorbed technology of smelting of various raw materials through Top Blown Rotary Converter (Kaldo) and Refining technologies envisaged in the design. Kaldo and Converter have been successfully operated with different types of raw materials. The Refinery has consistently operated at higher current efficiency (98.05%) and time efficiency (96.08%) than envisaged in the design operating parameters (current efficiency 96% and time efficiency 95%). Status of Working Capital Finance During the year, the company continued to face shortage of working capital finance due to higher LME prices of copper upto third quarter of 2008 and the lower production levels as sufficient quantities of the medium grade raw materials at favorable treatment / refining charges and high grade raw materials at higher discounts could not be procured due to adverse market conditions. Raw Materials Market Scenario The raw materials used by the company are different in nature as-compared to the raw materials used by primary copper smelters. However, the treatment and refining charges (TC/RCs) and discounts of the raw materials used by the company have direct linkages with the TC/RCs of concentrates used by primary copper smelters. During the year, the global economic melt down and lower TC/RCs and discounts over LME had adversely affected the company as the world market of raw materials remained tight. Safety and Occupational Health During the year, plant operated with Zero Accident because of managements continued focus and commitment. The regular in-house training programs were carried put to maintain highest standards of the safety consciousness. The departmental and central safety committee meetings were regularly conducted. The efforts of the company in maintaining highest standards of safety and health were recognized by upgradation of the OHSAS 18001-1999 Standard to OHSAS 18001-2007 Standard. During the year, health checks were carried out for all the employees and no occupational disease was detected. Environmental Issues During the year, emphasis and commitment to maintain sound environmental management practices for treatment of waste gases, water and solid / hazardous wastes were continued. The treatment of waste gases from furnace through scrubber or through bag filters was continued for ensuring adherence to the norms set by Environment Authorities. The plant was operated with Zero Discharge. The ISO 14001: 2004 certification by DNV was continued by successfully maintaining the environment standards. Energy Conservation During the year, several energy conservation projects were taken up. Few of the projects taken up were as under. (a) Installation of variable frequency drive in cooling water pumps at main cooling tower to take care of different flow requirements at optimum energy consumption. (b) Anode furnace combustion air fans were provided with the variable frequency drive to save energy consumption. (c) Refinery ventilation fans were provided with the variable speed drive to get significant saving on energy consumption. Research and Development During the year, Seminal Research & Development projects having relevance to the existing operations were undertaken. Further few projects have-been implemented in plant to improve operational efficiencies and reduce cost. Annexure - 2 to the Directors Report Details of Stock Options under SEBI (Employee Stock Option Scheme) Guidelines, 1999 1. Options granted - 19,36,500 Equity Shares of Rs.10/- each Options lapsed - 12,90,500 Equity Shares of Rs.10/- each Options outstanding (as on 31.03.2009) - 6,46,000 Equity Shares of Rs.10/- each 2. Pricing formula - Rs 10/- per share. 3. Options vested. - NIL Equity Shares of Rs.10/- each 4. Options exercised - NIL 5. Employee-wise details of Options granted and Outstanding as on 31.03.2009 - Senior Managerial Personnel - Nil Equity Shares of Rs.10/- each - Others - 6,46,000 Equity Shares of Rs.10/- each - Any other employee_ who is granted options during the year amounting to 1% or more of options granted. - NIL - Identified employee who is granted options during the year equal to or exceeding 1% of the issued capital. - NIL 6. Diluted Earning Per Share (EPS) pursuant to issue of shares on exercise of options. - N.A. ANNEXURE-3 TO THE DIRECTORS REPORT Particulars under the Companies ((Disclosure of Particulars in the Report of the Board of Directors) Rules. 1988 for the year ended 31st March. 2009. A. Conservation of Energy: The details are furnished in Table A below. B. Technology Absorption: The details are furnished in Table B below. C. Foreign Exchange Earnings and Outgo: Rs. in Lacs Rs. in Lacs 2008-09 2006-08 (1st April 2008 to (1st October, 2006 31- March 2009] to 31st March, 2008] a) Earnings FOB value of Exports 21994.19 32864.94 Gain on Hedging 10292.99 1144.28 Others 0.00 337.82 Total (a) 32287.18 34347.04 b) Outgo Raw materials 32593.73 33752.84 Stores & spares 95.68 81.45 Remuneration to Foreign Technicians 0.00 9.98 Foreign Travelling 7.12 5.74 Interest 804.55 3822.76 Testing Charges 8.00 14.73 Loss on Hedging 557.55 1075.53 Legal Expenses 16.88 0.00 Others 2.76 10.68 Total (b) 34086.27 38773.71 Table A Form of Disclosure of Particulars with Respect to Conservation of Energy: Particulars Unit Year ended Period ended 31st March, 2009 31st March, 2008 (1st April, 2008 to [1st October 2006 to 31st March, 2009) 31st March 2008 Power & Fuel Consumption Electricity Purchase Unit MWH 6373 4471 Total Amount (Excl. Demand Charges) Rs. Millions 33.01 19.64 Rate / Unit Rs./MWH 5180 4392 Own Generation Unit MWH 26522 43369 Rate Per Unit of Fuel Rs. 5.12 4.05 Cost / unit Rs. 5.44 4.11 Furnace Oil Quantity KL 11393 18391 Total Amount Rs. Million 252.6 292.20 Average Cost Per Ltr. Rs. 22.17 15.89 Diesel Oil Quantity KL 11.35 126.69 Total amount Rs. Million 0.37 3.51 Average Cost Per Ltr Rs. 32.97 27.69 LPG. Quantity MT 0 10 Total Amount Rs. Million 0 0.29 Average Cost Per Ltr. Rs. 0 29.84 Propane Quantity MT 192 328 Total Amount Rs. Million 7.71 8.96 Average Cost Per Kg Rs. 40.18 27.31 Table B Technology Absorption: Top Blown Rotary Converor (Kaldo) Technology: The technology supplied by Outotec (Sweden) AB (formerly Boliden Contech AB) consists of smelting of various copper bearing raw materials like oxides, sulphides, metallics and other such compounds in lumpy and powdery form. The technology uses oxygen flash smelting of concentrates as well as smelting of lumpy material using oxygenfuel burner. This technology has not only been absorbed but improvements like direct revert charging system and burner lance air dilution, slag settling furnace were incorporated during the period with in-house expertise and resources. The company has been able to use all materials and develop processes for smelting all the items. The quality of output (anodes) has been consistently as per design. All operations like smelting, converting, anode furnace refining and cast wheel operations have been stabilized. Refining Technology: X-STRATA (formerly Mount Isa Mines) supplied license and technology for electrorefining using permanent cathodes. The various operations of anode preparation, cell operations, cathode stripping, slime recovery, etc. have been stabilized. The operating indices like cathodes quality, current efficiency, scrap generation, etc. have been satisfactory in accordance with the design.