Jolly Board Ltd Management Discussions

• Industry Structure and Development:

Jolly Board is the leading Brand Name in Soft Board used in interiors and packaging and as Expansion Joint in Construction Industries. Jolly Board is able to compete effectively in the local and international markets due to it’s renowned brand name and competitive price.

• Opportunities and Threats:

The Company has been able to lower the cost of manufacturing by shifting out of Mumbai to Aurangabad and Sangli. The cost of Raw Material has come down due to proximity to Sugar mills. Cost of Labour is much lower at Sangli and Aurangabad than at Mumbai.

The Company owns land at Kanjur which has become a hub of development activities due to proximity to Central Railway network and city freeways. The Company has started leasing out it’s newly constructed offices.

The major threat is the slowdown in economy in Europe resulting in the manufacturers from European countries exporting to countries like India and in Middle-East and compete with our products in a big way.

• Segment-wise or Product-wise performance:

Company is a single product Company and hence segment-wise or product-wise performance is not provided.

• Outlook:

The Company’s product will enjoy a buoyant market as the thrust in infrastructure project will continue to grow in India.

More and more IT hubs are under construction in India, which will require soft boards made by the Company.

As a policy, the Government is giving a major thrust to education specially rural education. The schools and colleges have started consuming our products in substantial quantities.

The middle eastern market continues with their major infrastructure projects. Due to their sandy soils and variation of ambient temperatures, consumption of Jolly Board Expansion Joint has increased and Company continues to bag orders from various projects. This has resulted in increase in export sales.

• Risks and Concerns:

The Company has only one product, and if competition increases then it would be an area for concern.

The Company has no major competitor. However there are many small scale manufacturers in the country who benefit from lower cost and various incentives given to small scale industries by the Government.

The Company’s products have also to compete with alternative products made from plastic and petrochemicals.

The Company depends on coal for operating its boilers. The price of imported coal witnessed an unprecedented increase, even the quality (calorific value) of coal is uncertain, coal having lower calorific value results in higher consumption cost.

Continued reduction of peak import tariffs by Government of India will expose the industry to flood of imports and will significantly alter the fortunes of the Industry and the Company.

Rise in rate of inflation will impact the profitability of the Company, since there will be increase in prices of all inputs and cost of services, without matching increase in price for the Company’s products.

The Company’s raw material is bagasse which is sugarcane based. The availability and price of bagasse are dependant on the sugarcane crop and the monsoon. The availability and price of sugarcane bagasse is impacted by its use inter alia in Captive Power Plants.

A large portion of the Company’s products is exported and hence a fall in export markets has an impact on the Company’s performance. The profitability of the Company is influenced by strength and weakness of the Rupee.

• Internal Control System and their Adequacy :

The Company has a well defined internal control system. The Fixed Assets register is fully updated. Purchase and other expenditure are fully streamlined. Reviews are done by the audit committee. The present accounting system is online.

The operating ratios, inventory levels are better than industry parameters.

• Discussion On Financial Performance with respect to Operational Performance:

The Company regularly benchmarks its production cost with its competitors especially in Europe and Far East. The Company is positively a low cost producer of soft board.

The Company has been able to reduce its financial charges to barely 1% of its manufacturing costs. The Company’s products are quality oriented and have a good brand name and are the preferred choice of consumers especially in the export markets.

• Human Resources and Industrial Relations:

Company continues to maintain healthy industrial relation in both the manufacturing units.

Company can boast of a young and skilled workforce and staff who are well trained in their respective jobs and are also multi-skilled.

Company is able to service both domestic and export market with short lead-time due to high productivity and good industrial relations in the plants.

With very competitive labour cost, Jolly Board continues to have an edge over the European manufacturers.

• Cautionary Statement of the Company:

Statements in this report on Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable security laws or regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the company’s operations include global and domestic demand-supply conditions, finished goods prices, raw material costs and availability, changes in Government regulations and tax structure and other factors such as litigation and industrial relations.

The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.