Kilburn Engineering Ltd Management Discussions.

CURRENT & FUTURE BUSINESS OUTLOOK

Your Company is engaged in design and manufacturing of special purpose process equipment and systems for critical applications primarily in the chemical, petrochemical and nuclear power sector.

During the year under review, the order booking was Rs 98 crores. The cyclic demand for dryers was not offset by orders from the tea industry due to poor sentiments of tea. However, Kilburn did well to bag majority of the orders that came for dryers from the chemical sector. The carbon black industry, which generated good orders in the previous year, focused on commissioning the dryers that were supplied during the current year. This sector is expected to generate fresh orders in the coming year. There are several active enquiries from the chemical, petrochemical and nuclear power sectors that the Company is aggressively pursuing. Orders are also expected from the carbon black sector.

INDUSTRY OUTLOOK

The company has faced sustained pressure on margins due to stiff competition from the Chinese engineering equipment manufacturers. In the coming year, this pressure is expected to ease considering the negative sentiment of imports from China.

1. RISKS CHALLENGES AND THREATS :

COVID is expected to take a toll on the demand for dryers as many organisations are delaying expenditure on capital projects. The Company will focus on the export markets as it is expected that the US and European markets will revive faster.

The tea industry in showing signs of revival with tea prices firming up. There are indications of the factories ramping up production. The Company has established itself as a reliable manufacturer for dryers and withering machine enjoying dominant market share in India, Bangladesh and Africa. This will be maintained in the year that follows.

FINANCIAL PERFORMANCE

Financial performance has been separately dealt with under the Directors Report.

There were no Significant Changes in Key Financial Ratios (i.e., change of 25% or more as compared to the immediately Previous Financial Year).

Segment-wise or Product-wise Performance

The Company is primarily engaged in designing and manufacture of drying systems for diverse applications. The Companys performance in respect of these business groups has been outlined in the Directors Report.

Risks Mitigation
< Infringement Intellectual property Rights. (IPR) a) Constant innovation of the Companys products to deter copying of the product by unscrupulous competitors.
b) Your Company is providing a total system to customers against products by some competitors which mitigate the risk from competition to an extent
< Business Risk The primary risk faced by your Company comes from increased competition in various segments due to entry of large number of domestic and international players. Your Company provides a performance guarantee to its customers which in short guarantees the technology provided which many of the smaller players are unable to provide. Chinese challenge is being mitigated by providing post commissioning support and strengthening the trust with the customers.
< Long execution periods expose your Company to the risk of price variations. At the time of quotation your Company executes Suitable contracts with vendors where price & credit period are matched with the buyers terms.
< As significant portion of the Companys sales is export the Company also faces the risk of currency fluctuations. Your Company has a policy of hedging currency exposures to optimum levels.
< As the Companys products are capital goods in nature, cyclical dip in sales is an inherent risk in its business. Your Company is continuously developing several new products and expanding geographically which helps to bridge dip in sales if any of established products.
< COVID impact and the risk of delay in capital expenditure by customers. Your Company expects that the export market will revive faster and will make greater focus on exports. The China factor may limit price competition even in export markets, particularly the US.
< Due to changing economic environment Customers delaying The Company insists Letter of Credit (LC) terms with new and overseas customers.
i) Payments However, there remains a risk about the customers asking for postponing delivery when Companys manufacture is completed. Such demands are settled through negotiations.
ii) Taking Delivery of the manufactured product on committed date

INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY: GENTLE WORD OF CAUTION:

The Company has a system of regular internal audit and they report inter-alia on the adequacy of the internal controls. The internal audit reports are presented to the Audit Committee and are discussed at the Board meeting. Their recommendations are duly compiled with.

HUMAN RESOURCE DEVELOPMENT :

Your company values human resources and has constantly worked on strengthening the technical capabilities of the team while making the entire organisation younger. Structured reorganization has been done in phases to streamline policy deployment and work flow and prepare the organisation for the future.

Employee relations remained cordial throughout the year under review.

Some of the statements in this management discussion and analysis report describing the Companies objectives, projections, estimates and expectation may be Forward Looking Statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in industry, significant changes in political and economic environment in India, tax laws, foreign exchange fluctuation, custom duties, litigations and labour relations.

For and on behalf of the Board

Place : Kolkata Aditya Khaitan
Date : 22nd July, 2020 Chairman