Mardia Samyoung Management Discussions


MARDIA SAMYOUNG CAPILLARY TUBES COMPANY LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS The management is pleased to present herewith the Management & Analysis Report as per the provisions of Listing agreement entered into with the Stock Exchanges and the Code of Corporate Governance approved by the Securities & Exchange Board of India broadly touching the following aspects: 1. Industry structure and developments. 2. Material Developments during the year 3. Opportunities and Threats. 4. Segment-wise or product wise performance. 5. Outlook - Risks and concerns. 6. Internal control systems and their adequacy. 7. Discussion on financial performance with respect to operational performance. 8. Material developments in Human Resources / Industrial Relations front, including number of people employed. This management discussion and analysis report might contain certain forward looking statements which represent the managements vision for the future. The actual results may vary depending on various internal and external factors beyond the control of the management. The views mentioned herein are also subject to change as and when required to suit the future management policies and circumstances in the market or economy. Statement in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be forward- looking Statements within the meaning of applicable securities, laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the company operates, changes in the Government regulations, tax laws and other statutes and other incidental factors. Further the discussions following herein reflects the perceptions on major issues as on date, and the opinions expressed here are subject to change without notice. The company undertakes no obligation to publicly update or revise any of the opinions or forward looking statements expressed in this report, consequent to new information, future events or otherwise. The company has adopted the best and the most sophisticated technology to suit Indian needs. The company as a part of reducing manufacturing cost of products as also to strengthen the bottom line, has decided to adopt the policy of becoming backbone provider to the industry through focusing on various components. Industry Structure and Development The companys products include Copper, Brass, Stainless Steel and alloys of Copper in form of Bars, Tubes, Wires, Ingots and Profiles. These products have applications in various engineering and electrical industries which manufacturing metal parts and components. Non-Ferrous Metal industries normally manufacture some of the above items and specialize in one of the items, however Mardia Samyoung Capillary Tubes Company Limited (MSL) produces all the above items and also specializes in irregular shapes and sizes of profiles and sections. The growth in non-ferrous metal industry is directly related to the growth of industries having engineering and electrical applications like automotive, gas valves, pumps, fans and industrial machinery. High volume segments are catered by domestic manufacturers. MSL primarily caters to Various Engineering and Electrical industries in the country. Material Developments During the year 2004-05 ARCIL (Asset Reconstruction Company of India Limited) on behalf of ICICI the secured creditors had taken the possession of Plant and Machinery and other miscellaneous movable Assets under the Securitisation Act, 2002, and had sold these movable assets. The company has now purchased back adequate machinery to continue and improve upon its day to day operations, as seen from the improved performance of the company. The Accounts have been drawn up based on the going concern, assumption based on the management perception of the future of the company. Opportunities and Threats As mentioned above, the growth of metal industry is linked to the growth of the major engineering and electrical applications industry, i.e. the Automobile / Engineering / Railways. Demand growth in Non-Ferrous Metal industries will largely depend on growth of the original equipment manufacturers (OEM) in the automobile industry, engineering & electrical segment and opportunities in the international markets. The demand for MSLs growth will heavily depend on the growth in served industrial Engineering and Electrical industries business both in domestic and international markets. The growth in demand for Non-Ferrous Metals will depend on the growth of Industrial and infrastructural activities. Liberalization of industrial policy, WTO driven reductions in duty structure, growth in demand in export markets, and increasing demand for industrial products may result in an increase in demand for large Non-Ferrous Metals. Segment wise performance The Management reviewed the disclosure requirement of segment wise reporting and is of the view that since the Company manufactures Non- Ferrous Metals and related products which is a single business segment in terms of AS-17, a separate disclosure on reporting by business segments is not required. The geographical segments however, have been determined on the basis of location of major customers of the Company. During 2006-07, 100% of the Companys turnover was to customers located in India. However the company is now poised to export some of its products to European countries. Outlook - Risks and Concern MSL, being one of the leading manufacturer and part of large Surendra Mardia Group, enjoys several advantages which will become increasingly important in view of a globalizing Indian economy: * The possibility to export to other countries represents a good growth potential for MSL and provides a possibility to partially compensate variation in demand on the domestic Indian market. * With increase in growth of Industrial and infrastructural activities the demand for non-ferrous metals is likely to improve. * MSL enjoys the locational advantages as major consumers are located in this region of the country. It is centrally located with easy geographical access to rest of the country. * The Company has plans to improve the productivity, efficiency at all levels and mange expenses effectively. * MSL unit is well equipped with sophisticated facilities. With continuous up gradation of technology MARDIA has successfully developed several types of Copper based alloys & are geared up for mass production. * MSL offers prompt services, Professional Managers play a role of active participant in development activities of valued customers. Mardia has successfully reached all customers and sectors of Indian Industry and its products find appreciation in various Industrial like Aeronautics, Automobiles, Agriculture, bearing, Defense and Ordnance, Electrical, General Engineering, LPG/ Industrial Gases, Refrigeration and Air conditioning, Sugar, Thermal power etc. With this background barring unforeseen circumstances the Company expects to report improved results during the current year. The main risks are: * Significant increase in raw material costs will impact production costs and if non-ferrous metal prices cannot be raised, will drastically impact profit margins unless operating costs can be reduced at unprecedented magnitude and speed. MSL needs to remain profitable for domestic sales and globally competitive for exports. * Quality of inputs with on time delivery remained a significant concern to the companys success in future. To uphold MARDIA Brand equity, MSL needs to ensure that the inputs being used to manufacture its products conform to the exact specification of global standard. * With growing Indian economy coupled with the reduction in import duties makes India increasingly a target market for many international manufacturers and therefore competitive pressures on the domestic market will continue to grow faster. In fact, imports from neighbouring far eastern countries are increasing over the years. This trend is expected to lead to price pressure in domestic market. The management of MSL is aware of both, opportunities and threats, and will continue to work to maintain competitiveness by reducing costs and improving quality as well as on growth of sales in the domestic market. Internal Control Systems The various internal control systems operating in the company are working satisfactorily. The internal Audit team continuously monitored the adequacy and effectiveness of these systems and the findings of these audits are reported to the Audit Committee of the Board and also to the Board of directors. The adequacy of the internal control system has also been examined by the Statutory Auditors and they have not received any major adverse comments from them on the adequacy of the internal control systems. The Company has an internal control system commensurate with its size and nature of business which provides for: * Accurate recording and custody of assets. * Compliance with applicable statutes, policies procedures, listing requirements, management guidelines and circulars. * Transactions being accurately recorded, cross verified and promptly reported. * Efficient use and safeguarding of resources. * Adherence to applicable accounting standards and policies. Internal checks and controls are exercised by strictly adhering to the various procedures laid at the time of Delegation of Authorities and other Procedures. The delegation clearly indicates the powers along with the monetary limits, where ever necessary, that can be exercised by various levels of the Managers in the Company. Financial Performance vis-a-vis Operational Performance The Net Sales (with other income) grew from Rs. 1992.77 lacs in 2005-06 to Rs. 3227.24 in the year 2006-07. Due to the improvement in metal prices and increase in demand, the company could improve upon its working and achieve nearly 62% increase in Sales and the company has showed consistent improvement upon 100 % increase in the previous year. Moreover the interest burden on the company is also now negligible. During the previous years the company had settled the dues of Dena Bank and Union Bank of India under One Time Settlement Scheme. The company has since purchased all the movable assets necessary for continuing day to day operations. Now the company is in a better position to improve upon its sales and profits. The company has also improved its product mix with higher margin of profits. Your Company has explored the possibilities of manufacturing other related products and your Directors are confident of achieving better production and sales of its new products. The Companys products have been highly appreciated by almost all its customersHowever, the actual consumption of our products is very low in India and the Company is trying its best to create consumer awareness. During the period under review, production in terms of quantity has increased by 48% compared to last year due to better utilization of capacity. While production of stainless Steel tubes had been maintain at same level, the production of other items of Copper and Brass had been increased to meet the demand. Cautionary Statement. Statement in the Management Discussion and Analysis describing the companys objectives, projections, estimates, expectations may be forward- looking Statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes an other incidental factors. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to new information, and future events or otherwise. Human Resources & Industrial Relations The Associates remained our most valuable assets & actively involved towards growth & progress. The relationship between the Associates of the company and the Management remained congenial ever time & any time. The company employed around 86 associates. (Including 8 Officers) as on March 31, 2007.