Liberty Phosphate Ltd Merged Management Discussions

LIBERTY PHOSPHATE LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS The Board takes pleasure in presenting your Companys Twenty Fourth Annual Report for the year 2011-12 along with the compliance report on Corporate Governance. This chapter on Management Discussion and Analysis forms part of the compliance report on Corporate Governance. Industry Structure and Development: India is basically an agricultural country and agriculture is the backbone of Indian economy. As a result, Indian fertilizer industry has tremendous scope in the country as it is one of the allied parts of agriculture providing agri-input. However, India has a tremendous task of feeding its fast increasing population. In order to be self sufficient in food grains, heavy reliance will have to be placed on fertilizers. Single Super Phosphate (SSP) Fertilizer industry is the pioneering fertilizer industry in the country. Since conventional agricultural practices are still being pursued by the farmers who use most efficacious quality seeds & fertilizers due to poverty, SSP fertilizer is cost effective for them as it provides phosphorous and sulphur at lower cost. Hence, small and marginal farmers prefer to use it because it is easily affordable. Major portion of agricultural land in India is Sulphur deficient, and it adversely affects the crop yield. N, P, K & S in proper ratio increases fertility of soil. Single Super Phosphate (SSP) fertilizer contains Sulphur and Calcium besides Phosphorus so it is an ideal manure to eliminate sulphur deficiency of soil resulting into increase in yield of pulses, groundnut etc. to a great extent. Today, Indian Fertilizer Industry is developing in terms of technology. Indian manufacturers are adopting advanced manufacturing processes to prepare innovative new products for Indian agriculture. Indian farmers have started making pace with the technological development. Uses of modern techniques of sowing wherein mixture of seeds and granular fertilizer is used at the time of sowing only. This has resulted into shifting of fertilizer demand from powder to granular fertilizer. In view of this, your company has enhanced production capacity of Granulated SSP from 247500 MT/annum to 330000 MT/annum during the year under review. The role of SSP in improving soil health of the country is recognized and is proved by the recent policy pronouncement of the Union Government. Finance Act, 2012 has given stimulus to the fertilizer industry through reduction of basic customs duty on some water soluble fertilizers and liquid fertilizers, other than urea, from 7.5 percent to 5.0 percent and from 5.0 percent to 2.5 percent. Also the import of equipment for fertilizer projects are being fully exempted from basic customs duty of 5.0 percent for 3 years. We therefore expect SSP to have a good future in the years to come. Performance: Registering a turnover of Rs.48659.39 Lacs, the Company has earned a net profit of Rs.5391.38 Lakhs after providing for Income Tax compared to the corresponding figures in the previous year of Rs.36418.76 Lakhs and Rs.3518.52 Lakhs respectively. Consequently the turnover and net profit have gone up by 33.61% and 53.23% over the corresponding figures of previous year. Production: During the year under review, your company achieved production of 483053 MT of Single Super Phosphate, NPK Mixed Fertilizers and Magnesium Sulphate as against production of 386016 MT in the previous year recording growth of 25.14%. Internal Control Systems and their adequacy: The Company has proper and adequate system of internal controls to protect its all assets against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported in conformity with generally accepted accounting principles. The Board of Directors has an Audit Committee, whose Chairman is an Independent Director. The Committee meets periodically to review internal controls. Human Resources: People play a vital role in an organizations portfolio and human capital forms the critical part of its privileged assets. Company continued its commitment to acquire, develop and enhance its human potential. Companys strategy of empowering people at all levels to take decisions and encouraging free flow of information and ideas, has helped in strengthening its human capital. Opportunities: The Company has four manufacturing units situated at Udaipur (Rajasthan), Nandesari (Gujrat), Kota (Rajasthan) and Pali (Maharashtra) which put it in a good stead to speedily service demand. Your company is also going to establish one more Unit at Raebarely in the State of Uttar Pradesh, where Plant & Machinery is under erection, and commercial production is likely to commence somewhere in the year 2012-13 to cater demand of North and East India speedily. Proximity to raw material sources/markets coupled with a dedicated multi-disciplinary work force has all along enabled the company to respond to spurts in demand. The Companys brand of Agri Inputs DOUBLE HORSE is well accepted in the market as premium quality product. The company can embark upon aggressive product promotion and customer education programmes which are required since the major target customer is the poor Indian farmer. The company with its sales network has started encashing on its link with the farmer to promote other Agri Inputs. The company is in advanced stage of talks with other manufacturers to roll out newer products so as to have a larger basket of offerings to its customers. Threats: Increase in margins will usher in new competition even business houses with zero experience in fertilizer manufacturing entering the sector, which the company is well poised to tackle since it has been in the market for long and its brand established. Since the companys business is dependent upon policy dispensations of the Government, any change therein may likely to affect the proj ections and plans of the company. Future Outlook: For an industry dependent upon food grain production to meet the requirement of ever growing population, the future outlook is positive. Despite India being third largest producer of fertilizer in the world, there is a scope of increasing production of fertilizer to cater the demand of farmers. Cautionary Statement: Statement in this management discussion and analysis describing the Companys objectives, projection, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied as many factors- like, availability of raw materials, changes in political and economic environment in India, applicable Statutes, Labour Relations and Interest Costs etc., may affect the companys operations.