Krishna Ferro Products Ltd Management Discussions

KRISHNA FERRO PRODUCTS LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS COMPANY OVERVIEW: Krishna Ferro Products Limited was incorporated in the year 1982 and started its commercial production in the year 1985. The Company has completed its twenty six successful years of operations in the month of December last year. The Company is engaged in the business of manufacturing and sale of ferrous casting. The Company has varied facilities which make it a unique foundry in the eastern part of the Country. The company aims to provide its customers, products and services consistently conforming to clearly established customer requirements at the right time and right cost. INDUSTRY STRUCTURE AND DEVELOPMENT: Metal Casting Industry is a Mother Industry. Most of the industries use cast metal components in some form or another. Industrial revival, after steep recession, has given boost to foundry industry. Improvement in infrastructure and power generation in particular shall further increase the demand of castings. After service sectors record growth in the last decade, manufacturing sector is poised to have accelerated growth now due to its potential to offer employment to growing population. This will obviously, result in increased demand of castings for sustained and increased growth of economy. BUSINESS OPPORTUNITIES AND THREATS: The foundry industry is a core industry producing castings which is basic input to almost all sectors like automobiles, textiles, engineering, cement, steel, mining etc. The Company is likely to maintain a steady growth oriented performance both in terms of top line and bottom line. The Company will focus its strength to develop new products in the niche market which will result in enhancing its margin. The combination of effective manufacturing costs along with quality systems would give an edge to the Company pricing and quality. Your Company will continue to focus on expanding market and developing new. The Company faces stiff competition with new foundries being established and also with the existing players in the sector. Further instability in the prices of metals & other inputs and rising interest rates is perceived as a threat. The continuing power cuts imposed during 2011-12 has badly affected the production during the year under review and also stands as severe threat for the coming year. SEGMENT WISE AND PRODUCT WISE PERFORMANCE: The company primarily operates in only one segment i.e. manufacturing of ferrous casting. It is not possible to classify the products into groups. OUTLOOK: With Indian economy on the upward trajectory and with the governments focus on infrastructure development, core sector industries are likely to show good growth. In the current year, overall market is expected to grow. RISKS AND CONCERNS: Risk is an integral part of the business process. Your company is exposed to risk arising out of government policies, investment decisions, inflation, timely payments by customer, increase in input costs and other operating risks usually associated with Foundry operations. Your company is aware of the risks associated with the business process and suitable risk mitigation measures are being taken from time to time. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The company has an adequate system of internal controls commensurate with its size and nature of operation to ensure efficiency of operation, financial reporting, statutory compliances and to ascertain operating business risks, which is mitigated by regular monitoring and corrective actions. Internal Audit of the company has been carried out by M/s SRB & Associates, Chartered Accountants, Bhubaneswar. A qualified and independent audit committee regularly reviews the observations and suggestions of the internal auditors and takes necessary corrective actions. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE: The Company has performed considerable well during the year under review. Net Sales turnover and other income for the year was at Rs 3807.36 lakhs. The profit before depreciation and tax was Rs. 332.78 lakhs which is 13.37% higher than previous year. In the same manner the net profit for the year was Rs. 179.06 which is 19.99% higher than the previous year. SAFETY - HEALTH - ENVIRONMENT: Your Company is committed for the health and safety of the employees. The Safety Management System are constantly being monitored and improvised to compete with changing demands. Regular training and awareness programmes are also being conducted for the health, hygiene and safety of the employees. In addition, your Company is regularly complying with all the conditions of environmental clearance. HUMAN RESOURCES MANAGEMENT/INDUSTRIAL RELATIONS: The harmonious and cordial relations with workmen, employee and trade unions continued this year also. The company believes that the human resources are the most valuable assets of the company and it believes in preserving and nurturing these valuable assets. For being abreast with latest developments the company is maintaining regular interaction with business and industrial fraternity through prestigious institutions like The Confederation of Indian Industry (CM), Indian Foundry Association, All India Induction Furnace Association (AIIFA) and Last but not the least, Rourkela Chamber of Commerce and Industry. As on 31st March, 2012, the total number of employees on the rolls of the company was 62. QUALITY MANAGEMENT: Your company is committed to supply products and services confirming to the customers requirements by involving employees, vendors, contractors and customers, to achieve the vision of being a cost efficient supplier of quality product. Your Companys ISO 9001: 2008 certification has been revalidated after proper surveillance audit during the year. CAUTIONARY STATEMENT: Statement in this Management Discussion and Analysis Report, are based upon the data available with the company and on certain assumptions having regards to the economic conditions, government policies, political developments within and outside the country. The Management is not in a position to guarantee the accuracy of the assumptions and the projected performance of the company in the future. It is, therefore, cautioned that the actual results may differ from those expressed or implied herein. On behalf of the Board of Directors sd/- Place: Mandiakudar H.K AGRAWAL Date : 04th September, 2012 Managing Director