jhs svendgaard dental care ltd share price Management discussions

JHS SVENDGAARD DENTAL CARE LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT: During the year 2008-09, the oral care market grew by about 16 per cent. The overall market environment continued to be intense and in the face of an intense competitive scenario and despite difficult economic conditions, your Company continues to find its niche in the Oral Care market and got in its portfolio several big customers who can improve the financials of the Company substantially. Oral care sector comprises mainly of Toothbrush, Toothpaste, Toothpowder, Mouthwash, Denture tablets, etc.. The all India penetration of toothbrushes is 48.6% while toothpaste/toothpowder is 72.3%. Since the Indian market size is very large the penetration level is low, it offers huge potential for growth. Only 7% Indians brush twice a day but the usage is improving due to increasing awareness of oral hygiene in the country. Toothbrush: Approximately 700 million units per year of toothbrush are sold in the Country., the Company manufactures 250 million including export. By 2012 the Company plans to capture 60 -70% of the projected 1700 million unit toothbrush market. Toothpaste: Out of the total sales of toothpaste 60% is from family platform and 35% sales on cosmetic propositions and 5% sale for therapeutic benefits. We use advanced machines and manufacture products for both domestic & international clients catering to their specific needs as per required standards. FUTURE OUTLOOK: The Company manufactures wide range of Dental and Oral Care Products as contract manufacturer for many Domestic as well as Global Brands. The range of our products includes Toothbrushes, Toothpaste, Whitening gel, Whitening Mouth Rinse, Denture Cleaning Effervescent Tablets, etc. and several other exciting innovations are in the pipeline. Many of these products helped to expand international business. While the business of the Company has been confined to the Oral Care category where it faced intense competition, the outlook for industry is positive given the size of the opportunity. The Company is hopeful that through a combination of powerful marketing strategies, innovative new products and market development and expansion activities, the dentifrice market in India would continue to grow strongly over the next several years. OPPORTUNITIES AND THREATS: Opportunities:- Oral Care market is substantially unexplored in India, per capita expenditure on Oral Care and Oral Hygiene is very low in India. Our capacities provide the benefit of having economies of scale with greater volume to leverage fixed costs on which we shall further be able to leverage on still greater volumes. Threats:- Increasing raw material prices and tough competition could force the Company to reduce prices or give value addition in existing products which could in turn effect the bottom-line. To counter this, the Company has already added Toothpaste, Mouthwash, Whitening Gels and other Oral Care products and also plans to launch cosmetic/new products in the coming period. This would no longer keep the Company over dependent on any one activity. RISK AND CONCERNS: The Company like any other enterprise having national as well global business interests are exposed to business risks which may be internal as well as external. To ensure our long term corporate success, it is therefore essential that risks be effectively identified, analyzed and then migrated by means of appropriate control measures. The Company has comprehensive risk management system where the senior management team sets the overall tone and risk culture of the organization through defined and communicated corporate values, which enables us to recognize and analyze risks early and to take appropriate action. This enables active monitoring of the business environment and identification, assessment and mitigation of potential internal or external risks. The Board provides oversight and reviews the Risk Management Policy. In addition, there are regular internal audit activities carried out by the team of Internal Auditors who give their independent assessment on the risk mitigating measures and provide recommendations for improvement. INTERNAL CONTROL: The Company is trying to achieve adequate internal Control Systems, which are well commensurate with the nature of its business and the size and complexity of its operations and provide reasonable assurances of recording the transactions of its operations in all material respects and protection against misuse or loss of Company Assets. Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations including those relating to strengthening of the Companys risk management policies and systems. The internal audit for the financial year ending March 31, 2009 was entrusted to M/s L. K. Kapoor & Co., Chartered Accountants, New Delhi. ENVIRONMENT, HEALTH AND SAFETY: The Company pays utmost attention to safety of employees, related communities and environment at large and we are continuously focusing on the vision of a safe and pollution free environment. HUMAN RESOURCES: We have made significant efforts for training in the areas of marketing excellence, customer service and building capabilities for organised retail trade. Human Resources always have been, and shall continue to be, central to the growth of Company. We consider our human resource to be our most important assets. We are continually making efforts in the development of HR through a series of employee-friendly measures aimed at talent acquisition, development, motivation and retention. Our endeavor is to develop a culture where a sense of belongingness and ownership of work are the key motivating factors and provide world class training to create a world-class work force. SEGMENT WISE PERFORMANCE: The Company operates only in the oral care segment and hence segment-wise reporting is not applicable to the company. CAUTIONARY STATEMENT: Statement in this report describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Although we believe our expectations are based on reasonable assumptions, these forward-looking statements may be influenced by numerous risks and uncertainties that could cause actual outcomes and results to be materially different from those expressed or implied.