Jyothy Consumer Products Ltd Merged Directors Report

JYOTHY CONSUMER PRODUCTS LIMITED [FORMERLY KNOWN AS HENKEL INDIA LIMITED] ANNUAL REPORT 2011-2012 DIRECTORS REPORT To, The Shareholders Your Directors have pleasure in presenting the 91st Annual Report of the Company together with the Audited Accounts for the 15 months financial period ended 31st March, 2012. FINANCIALS The financial period under review commenced from 1st January, 2011 and ended on 31st March, 2012 comprised of 15 months while the financial year 2010 comprised of 12 months commencing from 1st January, 2010 to 31st December, 2010. The closure of the financial year was deferred to match the financial year of Jyothy Laboratories Ltd. (JLL), holding company of the Company. The Company sold its Hair-Care Division SKP in the month of April, 2011 (before the take-over of the Company by JLL). Therefore, the figures for the previous financial year 2010 included the Sales generated under Hair-Care Division whereas, except for the period upto April, 2011, the figures for period under review does not include the figures in respect of Hair-Care Division. Hence, the absolute figures for financial performance for the year under review are not comparable with that of previous financial year. The Financial highlights of the period under review are as below: Stand alone: (Rs. in lac) From 1st January, From 1st January, 2011 to 31st 2010 to 31st Particulars March, 2012 December, 2010 (15 Months) (12 Months) Sales (net) 44,800.85 45,017.15 Other Income 163.05 381.25 EBITDA 3,146.74 2,412.22 Financial Expense 1,958.16 1,696.14 Depreciation and Amortizations 780.01 603.39 Profit before Tax and Exceptional items 408.57 112.69 Exceptional items - Sale of Division 2,534.77 - - Bad debt written off (9,000.00) - Profit Before Tax (6,056.66) 112.69 Tax expense - Current tax - 20.28 - MAT credit entitlement - (20.28) Profit After Tax (6,056.66) 112.69 Balance in Profit and Loss Account as per last Balance Sheet Brought Forward 803.49 695.80 Add: Balance transferred from General Reserve 1,047.38 - Balance at the end of the period Carried Forward (Profit and Loss Account) (4,200.79) 808.49 Earnings Per Share (Basic and Diluted) (5.20) 0.10 Consolidated results (Rs. in lac) Particulars From 1st January, From 1st January, 2011 to 31st 2010 to 31st March, 2012 December, 2010 (15 Months) (12 Months) Sales (Net) 52,733.56 53,390.35 EBITDA 2,514.83 (1,748.26) Financial Expense 5,822.61 2,832.61 Depreciation and Amortisations 780.01 603.39 Loss before Tax and Exceptional items (4,087.79) (5,184.27) Exceptional items 2,534.77 - Loss before tax (1,553.02) (5,184.27) Loss after tax (1,553.02) (5,184.27) The Net Sales for the period under review was Rs.52,733.56 lacs as against Rs. 53,390.35 lacs during the previous year 2010. EBITDA margin for the period under review was 4.77% as against negative EBITDA margin of 3.27% in the year 2010. The Company incurred Net Loss after tax of Rs. 1,553.02 lacs as against Rs. 5,184.27 lacs during the year 2010. HUMAN RESOURCES During the year under review, the production at the Karaikal factory was affected due to interruptions, labour unrest and shut-down for a period of 61 days which affected the performance of the Company during the respective quarter. Your Company supports the Employees with tools, systems, standards and individualized training programs to create an environment in which individual performance and teamwork can thrive. The Company believes in maintaining cordial relationship with all employees. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO With regard to the requirements of Section 217(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the Company has nothing specific to report. Foreign Exchange Earnings and Outgo: (Rs. in lac) Particulars From 1st January, From 1st January, 2011 to 31st 2010 to 31st March, 2012 December, 2010 Foreign exchange earnings 1,217.29 436.00 Foreign exchange outgo 2,331.58 3153.91 SUBSIDIARY COMPANY At the end of the Financial year, the Company had 1 (one) subsidiary viz., Henkel Marketing India Ltd. As per General Circular No. 2/2012 dated 8th February, 2011, issued by the Ministry of Corporate Affairs, Govt, of India in terms of provisions of Section 212 of the Companies Act, 1956, the Central Government granted general exemption under Section 212(8) of the said Act from attaching to its Annual Report, the copies of the Balance Sheets, Statements of Profit & Loss, Directors Reports and Auditors Reports and other documents of all its subsidiary companies that are required to be attached under Section 212(1) of the said Act. Accordingly, your Directors have pleasure in attaching the consolidated financial statements prepared in accordance with the Accounting Standard AS-21 on consolidated financial statements, which form part of this Annual Report. These consolidated financial reports provide financial information about your Company and its subsidiaries as a single entity. In view of the same, financial statements of subsidiary are not attached to the financial statements of the Company. A gist of the financial performance of the subsidiary is given in this Annual Report. The annual accounts of the subsidiary are open for inspection by any member and the Company will make available these documents/details upon request by any member of the Company interested in obtaining the same. AUDIT REPORT The Audit Report does not contain any qualification. However it has been observed under point No. vii) of the Report that the Company does not have an adequate Internal Audit commensurate with size and nature of business. After the take-over of the Company by JLL, the Audit Committee reviewed the same and recommended for appointment of Internal Auditors in its meeting held on 9th November, 2011. Accordingly, the Board, on recommendation by the Audit Committee, appointed M/s. Mahajan & Aibara, Chartered Accountants, Mumbai as Internal Auditors of the Company for the financial year 2012-13 in its meeting held on 22nd May, 2012. DIVIDEND For the year under review, your Directors have not recommended dividend due to loss incurred by the Company. PUBLIC DEPOSITS Your Company has not accepted any deposit from the public during the year. DIRECTORS In accordance with the requirements of the Companies Act, 1956, and the Articles of Association of the Company, Mr. M. P. Ramachandran, Mr. K. Ullas Kamath and Ms. M. R. Jyothy, Directors of the Company are due to retire by rotation at the ensuing Annual General Meeting of the Company and being eligible have offered themselves for re-appointment. The Board recommends their re-appointment. DIRECTORS RESPONSIBILITY STATEMENT In compliance with the provisions of Section 217(2AA) of the Companies Act, 1956 (the Act), your Directors confirm that: i) in the preparation of the annual accounts for the 15 months period ended 31 st March, 2012, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) accounting policies were adopted and applied consistently and judgments and estimates were made that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the profit or loss of the Company for the 15 months period ended on that date; iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv) the Annual Accounts have been prepared on a going concern basis. CORPORATE GOVERNANCE As per Clause-49 of the Listing Agreement with the Stock Exchanges, a section on corporate governance is presented separately and forms part of this Report. PARTICULARS OF EMPLOYEES The particulars of employees as required under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, are attached to this report. AUDITORS M/s. CNGSN & Associates, Chartered Accountants, Chennai, the Statutory Auditors of the Company will retire at the conclusion of ensuing Annual General Meeting and are eligible for re-appointment as Auditors of the Company. It is proposed to jointly appoint M/s. CNGSN & Associates, Chennai, and M/s. S.R. Batliboi & Associates, Chartered Accountants, Mumbai as statutory Auditors of the Company from the conclusion of ensuing Annual General Meeting till the conclusion of the subsequent Annual General Meeting to be held in the year 2013. The Company has received eligibility certificate from both the proposed Auditors in terms of Section 224(1 B) of the Companies Act, 1956. The Directors recommend the appointment of Statutory Auditors as proposed above. ACKNOWLEDGEMENT Your Directors take this opportunity to express their gratitude to all the employees for the significant personal efforts and their collective contribution. Your Directors wish to thank the shareholders for their continued support, encouragement and the confidence reposed in the Management. For and on behalf of the Board of Directors HENKEL INDIA LTD Place: Mumbai M.P. Ramachandran Date : 22nd May, 2012 Chairman MANAGEMENT DISCUSSION AND ANALYSIS REPORT 1. Revenue Analysis Net Sales for the fifteen month period from 1st January, 2011 to 31st March, 2012 was Rs. 448.01 crores as against Rs. 450.17 crores for twelve month period from 1st January, 2010 to 31st December, 2010. Whereas on consolidated basis, the net sales was Rs. 527.34 crores as against Rs.533.90 crores for the previous year. Detei gents & Cleansers business was driven by Henko, Pril & Mr. White while the Body Care business was driven mainly by Fa, Margo and Neem. At the group level, the Detergents & Cleansers business accounted for Rs.363.72 crores, while Body Care business clocked Rs. 163.61 crores, contributing 69% and 31% of net sales respectively. 2. Cost Analysis Our strong performance is reflected through the comparison of the following numbers. Rs. in crores Particulars January to March (fifteen months) 31.03.2012 31.03.2011 Growth % Income Net Sales 527.34 653.11 -19% Other income 7.66 5.93 29% Total income 535.00 659.04 -19% Expenditure Decrease in stock-in-trade and work-in-progress 4.46 2.57 73% Consumption of raw materials 93.07 169.82 -45% Purchase of traded goods 203.41 187.32 9% Employee cost 38.55 45.27 -15% Other expenditure 172.57 278.55 -38% Total expenditure 512.05 683.53 -25% EBIDTA 22.95 (24.49) 194% Depreciation 7.80 7.51 4% Profit/(loss) before Exceptional items and Interest 15.14 (32.00) 147% Interest 56.02 38.17 47% Profit/(loss) before Exceptional items (40.88) (70.17) 42% Exceptional items - Sale of SKP-Hair-care Division 25.35 - Profit/(loss) before tax (15.53) (70.17) 78% Tax Expense - - Net Profit/(loss) for the period (15.53) (70.17) 78% Total cost as proportion to total income reduced from 104% of total income to 96% of total income. Although the total cost (excluding depreciation and interest) in absolute terms decreased from Rs. 683.53 crores to Rs.512.05 crores. EBIDTA Margin increased from negative 4% to positive 4%. Depreciation for the period increased from Rs. 7.51 crores to Rs. 7.80 crores. Interest cost for the period increased from Rs. 38.17 crores to Rs. 56.02 crores. Exceptional items (Sale of SKP-Hair-care Division) reflect sale of its Hair care division on Profit of Rs.25.35 crores. 3. Financial Position On consolidated basis, Trade receivables increased from Rs. 27.41 crores to Rs. 32.83 crores, inventory decreased from Rs. 55.47 crores to Rs.42.43 crores, cash and bank balance increased from Rs. 4.2 crores to Rs.9.03 crores during the period. 4. Management Responsibility Statement The Directors confirm that the financial statements are prepared and presented in conformity with the Indian Generally Accepted Accounting Principles (GAAP) . The statements complies with accounting standards notified by the Central Government of India under Section 211 (3C) of the Companies Act, 1956, other pronouncements of the Institute of Chartered Accountants of India., provision of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India (SEBI). The Management of Henkel India Ltd. accepts responsibility for the integrity and objectivity of these financial statements, as well as for estimates and judgement. The management believes that the financial statements reflect fairly the form and substance of transactions and reasonably present the Companys financial conditions and results of operations. To ensure the above, the Company has established internal control system across the organisation commensurate with its size and nature of business. The internal control manual defines detailed procedures and guidelines, authorisation and approval procedures. Periodic internal audits have been conducted to ensure that the Companys established systems, policies and procedures have been followed. The Audit Committee periodically meets the in-charge of Finance Department and Auditors to review the manner in which they are performing their responsibilities and to discuss audit programme and progress therein. The internal audit report is tabled before the audit committee and the issues, plan for implementing corrective actions and recommendation of the audit report are discussed. To ensure complete independence, Statutory Auditors, Internal Auditors/representatives of Internal Audit Department have full and free access to the members of the Audit Committee to discuss any matter of substance. M/s. CNGSN & Associates, Chartered Accountants, Chennai have audited the Financial Statements enclosed.