MODERN SYNTEX (INDIA) LIMITED
ANNUAL REPORT 2005-2006
MANAGEMENT DISCUSSION AND ANALYSIS
The year under review was highly volatile for the polyester industry with
pressure both on top line as well as on bottom line. Production cost pushed
up due to increase in raw material (PTA & MEG) prices. This has coincided
with a bumper crop of cotton, which enabled cotton yam producers to make
available cotton yarn relatively cheaper, which resulted-in poor off take
of polyester yam for many months. The polyester industry in India and
globally has been suffering mainly on account of over supply of
POY/PFY/Polyester chips coupled with lower realization. The domestic
POY/PFY/Chips industry how has a large surplus capacity.
During the year under review the turnover of the Company was Rs 569 crores
as against Rs. 572 crores in the previous year. Your Company has been able
to reduce gross Loss before depreciation to Rs. 0.06 crores as against
gross loss of Rs.3.04 crores in the previous year. Your Company is
relentlessly putting all its efforts to reduce the cost and improve the
operating margins. Your directors are, however, unable to declare any
dividend for the ear under review in absence of profits.
The exports were Rs. 17 crores during the year under review as compared to
Rs. 19 crores in the previous year due to stiff competition from Far East
Countries. The Company is continuing its efforts to search for new
international markets to increase its export further. As tire prices of POY
/ PFY in international market are uneconomical due to excess supply and
cheap export from South East Asian Countries, the margins in exports are
still under pressure.
The potential of Indian textile sector continues to be high indicating
strong demand shift in favour of India, post abolition of quotas. The
Polyester Industry is likely to see a major growth in the next few years
with the Indian Governments Five Year action plan in place to promote
textiles. The POY/Chips capacity is poised to substantially increase
further with the major manufacturers increasing their capacity. The Company
may be able to improve the profitability in view of on going implementation
of de-bottlenecking programme. Since your Company is pursuing cost cutting
measures and improving efficiencies in manufacturing areas, the performance
is expected to improve further. However, the pressure on selling prices is
expected to continue due to threat from import. Unfortunately, the
Government did not pass on any relief in the Budget by way of reduction in
excise duty on Raw Material ( PTA & MEG ) to support the industry, whereas
duty on POY/PFY has been reduced which would only result in accumulation of
unutilized CENVAT credit and the same in turn will put extra pressure on
the Companys cash flow.
INDUSTRIAL RELATIONS & PARTICULARS OF EMPLOYEES
Your Directors sincerely appreciate the workers, staff and officers for
their test efforts. The Company has enjoyed healthy and cordial industrial
relations throughout the year. There is no employee getting remuneration.
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