MH Mills & Industries Ltd Management Discussions

MH MILLS AND INDUSTRIES LIMITED ANNUAL REPORT 2006-2008 MANAGEMENT DISCUSSION AND ANALYSIS DISCLAIMER: Readers are cautioned that this discussion and analysis contains forward- looking statements that involve risks and uncertainties. When used in this discussion, the words anticipate, believe, estimate,intend,will, and expected and other similar expressions as they relate to the Company or its business are intended to identify such forward-looking statements. The Company undertakes no obligation to publicity update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results, performances or achievements and risks and opportunities could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their date. The following discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto. OVERVIEW: The Companys principal businesses consist of manufacturing and marketing of Ready Garments fabric, bottom weights fabric, Twills and Polyester cotton and Cotton yarn. The yarn manufactured is partly sold and partly required for captive consumption by the Company, In the high inflation scenario, the company has made serious efforts to curtail various costs. FINANCIAL PERFORMANCE AND REVIEW: Financial Performance: The total Sales and other Income for the period ended 31st March, 2008 (18 Months) were Rs. 6985.80 lacs as compared to Rs. 6459.65 lacs for previous year ended 30th September, 2006 and are not comparable. The company sells Yarn partly in the domestic market and partly for the captive consumption The depreciation for the period under review is Rs. 493.07 lacs 18 months period on 31st March, 2008 as compared to Rs. 495.43 lacs for the previous year ended on 30th September, 2006. During the current financial period which is for 18 months period ending 31st March, 2008 (18 Months) the Company has reported Net Loss of Rs.10.30 Cores as compared to Net Loss of Rs.12.87 Cores in the previous, financial year ended 30th September, 2006 (12 Months). Raw Material, Dyes and Chemicals: The Companys main raw material Cotton have continued shown its uptrend trend during the year under review. The price of Dyes and chemicals has also increased substantially which has also affected the profit margins of the company. INDUSTRY: Textile division The Textile division of the Company is engaged in manufacturing high quality Cotton and blended fabrics and polyester and cotton yarn for the domestic market. Other prominent products include Cotton and Blended shirting, Trousering material, Long Cloth, Sarees, dress material and a wide range of Lawns, structured fabric etc. The Company enjoys a unique position in the Rubia segment. The Companys chief strength is its amazingly rich and fancy colour palette. In a business where shades reign supreme, the Voiles Division boasts of its incredibly large shade collection offering perfect blends for diverse tastes, each bearing the same stamp of quality and excellence. The ability to supply a huge range of colours in a variety of high quality products with rigid adherence to delivery deadline has been the key to Companys sustained growth and performance over past few years. In addition, the Company has an countrywide distribution network resulting into an unprecedented reach and deeper penetration into hitherto unexpiored markets. Constant product innovation and upgradation has always been the Companys top priorities, which has resulted into a huge product basket. Among the latest ones are Anti-microbial fabrics, Aroma finish and structured voiles etc. With the capacity expansion in the processing department, the Company has made headway into the Dress material segment, Cotton and Blended Shirting and Bottomweight Fabrics to reap in higher turnovers and market presence in the coming years. Product Group: The Company is having all required capabilities and infrastructure for manufacturing wide range of fabrics. The Company has focused on product developments, which has helped it in enhancing its product/ customer mix and achieve better realizations. The Company has a dedicated R & D team comprising of textile professionals including international consultants working on ongoing product development. Recent development includes products with count ranges from 16s to 2/100s, fibres containing cotton, polyesters blends etc., twill fabric. With significant efforts, company could come out with unique and differentiated products such as PU coated, slubbly, sulphur, dyed, yarn dyed, blotch printing and combinations weaves. The Company has launched innovative and latest finishes in all the fabrics ranges. INTERNAL CONTROL SYSTEMS: The company has well defined and institutionalized business processes with effective control systems to ensure that assets and interests of the Company are safeguard. The Company has a appointed Core Management Team which is responsible for preparation of the Performance Plan which are reviewed on monthly basis and compared with the actual, performance achieved so as to take immediate corrective actions, wherever necessary and are discussed to take corrective measures and achieve the projections. Considering the size and nature of operations of the company, the overall control systems are adequate to meet the need and the purpose. The company has internal audit carried out by a firm of Chartered Accountant who monitors the system in various areas of the internal control system and compliance. The Company has an External audit firm which monitors business processes and risks associated with them. DEVELOPMENTS ON HUMAN RESOURCES AND INDUSTRIAL RELATIONS: The period under review has continued to reduce labour force through payment of VRS and gratuity as per the Scheme. The Company values its human resources and believes in unlimited potential of each employee. Industrial relations were cordial in all the divisions of the Company without any disruptions of manufacturing activities.