Nissan Copper Ltd Management Discussions

1 INDUSTRY STRUCTURE & DEVELOPMENTS:

Copper is one of the most widely used industrial metals. It is best conductor of electricity with high electrical and thermal conductivity, high strength, malleability, corrosion resistance, precision castability. Because of its high ability to form alloys with other metals, it is used in wide range of industries including engineering, electrical, etc.

Over the years the use of copper has witnessed growth in electrical, transport, Consumer durables, engineering, construction, telecommunication etc. sectors. In the present survey the demand has been projected up to 2024-25 in the above sectors keeping in view the economic growth in future. The domestic demand works out to be 2. 3 million tonnes. To meet the demand in future the copper industry has already geared up. The supply projection of 2. 8 million tonnes by 2024-25 will satisfy the domestic demand in addition to exports demand.

i Refrigeration & Air Conditioning:

The refrigeration and air conditioners are becoming necessity in the average household. The industrial uses and modem offices require large size of AC plants to keep the working environment cool. An average Refrigerator consumes about 2 Kg of copper and average size of air conditioner consumes about 6. 8 kgs of copper per unit. The copper is used in the form of copper tubes in refrigerators as well as in T. V. tubes and electrical wires.

ii Heat Exchangers and Condensers:

Copper being tough, ductile and malleable makes it extremely suitable for tube forming. Being non magnetic copper is included amongst the various alternative materials which are suitable for use in condensers and heat exchangers in all types of environments including marine environment.

iii Valves, Pumps, Pipes and Vessels:

Copper are widely used for industrial process plants which are exposed to non- oxidising acids. Valves and pumps controlling the flow of liquids and gases in industrial processes are often made of Copper or copper alloys. In addition to corrosion resistance, copper also provide good physical strength.

iv Building and Construction:

Copper is the material of choice for plumbing, taps, valves and fittings for their aesthetic appeals. Large quantities of copper used in the industrialised countries in the construction of buildings are consumed in the form of copper tubing, taps. Copper tube systems are used for domestic water supply systems both hot and cold and for central heating systems. Copper tube may be used in buildings for piping gas between the intake and appliances in which gas is used as fuel. Copper tubes also help protect water systems from potentially lethal bacteria.

2 OPPORTUNITIES & THREATS:

Opportunities:

• Growth in HVAC Industry with the new entrants starting the manufacturing in India.

• Government has already started changing the method of delivery of LPG from Cylinders to Piping, thereby creating continuous demand for copper tubes.

• With the increasing activities in infrastructure sector the demand for Copper has witnessed growth in demand for copper tubes for the purpose of Air Conditioning and Refrigeration.

• Lesser Production Cost thus more competitive.

• Better Geography and product mix.

• Since the trade barriers and policies of countries like USA and Europe have provided a liberal hand to India, the demand for our products in those countries has accelerated. Apart from this we also foresee good business relations from GCC countries especially Qatar and Bahrain, where the growth in infrastructure is tremendously shooting upwards.

Threats:

• Substitutes: With the relatively high volatility of copper prices (raw material) which are controlled by the London Metal Exchange (LME) over the last several years, increased attention has been paid to the issue of substitution. Some of the substitutes are Aluminum, Zinc, plastic, stainless steel, optical fiber, etc.

• Competitive Rivalry; Competitive pricing strategy adopted by competitors due to trade economies may pose threat on market pricing leading to a reduced return as compared to expectations.

• New Entrants: Stiff competition is faced from Chinese producers as well as producers within the country which include the SSI (Small Scale Industry) and unorganized sector players.

• Due to decreasing value of Rupees in world market, rise in interest rates, inflation and slow down in global economies may lead to drop in global commodities demand.

• Volatile market leading to volatile earnings and commodity price.

Challenges:

The challenges include marketing of the new product manufactured by the Company i. e. ACR Copper tubes along with current products manufactured by the Company. The other major challenge is that the Company has to develop strategies related to marketing, production, sales viz. with the current financial position of the Company and keeping in mind the rates of copper in world market.

3 PERFORMANCE:

During 2012-13, the Company sold 1120. 73 tonnes of Copper & other related Products as against 6541. 25 tonnes in 2011 -12.

4 FACTORS INFLUENCING COPPER MARKET AND PRICES:

• Copper prices in India are fixed on the basis of the rates that rule on LME and Rupee & US Dollar exchange rate. The fluctuation in US Dollar is a major issue.

• Economic growth of the major consuming countries such as China, USA, Japan, Germany, India, etc.

• Growth and development in the Infrastructure, Power Sector, Real-estate, Telecom and Electrical Industry.

• Natural calamities such as earthquakes and floods affect the production in mines and transportation thereby affecting the supply.

• Quality of ores.

• Heavy Tax burden.

5 FUTURE OUTLOOK:

The Indian Economy is unstable but showing signs of revival in near future. The increase in building and construction industry and increase in demand of luxury items and also with increase in demand of electric consumption both in domestic as well as industry levels. The company with availability of funds through CDR will opt for National as well as International arenas.

6 RISKS & CONCERNS:

In the current scenario the major concern being the unrest in the global market which has boosted crude oil prices and threatens to derail global economic recovery, which in turn, could depress copper demand.

Inflation, demand and supply dynamics, impact of debt crisis in Euro zone on copper prices are some of the risks involved. The fundamental outlook for copper is given in this report on the basis of prevailing market conditions. In case of any ambiguity, the situation for copper may change. Nissan has insured its assets and operations against a wide range of risks, as part of its overall risk management strategies. However, the Companys operations have historically shown significant exposure to the resilience to the fluctuations of economic and industry cycles, with demand for most of its key products continue to grow at healthy rates even at times of an overall economic slowdown.

7 INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY:

Your Company has a sound internal control system commensurate with its size. Internal Audit reports are discussed by the professionals & member of Audit Committee & suitable corrective actions as suggested are adopted by the management. We have always believed that transparency, systems and controls are important factors in the success and growth of any organization.

8 DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Management Discussion and analysis of the Companys operations and financial consolidation together with discussion on financial performance with respect to operational performance should be read with conjunction with the financial statements as given below:

FINANCIAL PERFORMANCE:

(Rs. In Lacs)

Particulars	2012-13	2011-12
Sales (Net of Excise Duty)	5703.98	28,148.16
Growth in sale	-80%	-1%
Profit before depreciation. Interest & Tax (EBDIT)	(2,095.60)	3,357.02
Depreciation	1,565.77	1,036.21
Interest & Financial charges	2,815.38	2,439.43
Profit/(Loss) before Tax	(6,476.75)	(118.62)
Income Tax	725.61	73.35
Net Profit/doss) After Tax	(7,202.36)	(191.97)
Equity Share Capital	6,285.59	6,285.59
Reserves & Surplus	9,289.83	15,759.32
Net Worth	15,104.90	22,044.91
Earnings per Share (EPS)	(11.46)	(0.31)
Cash Earnings per Share (CEPS)	(8.97)	1.34
Sales per Share (Rs. )	9.07	44.78
Book Value per Share (Rs. )	24.03	35.07

9 MATERIAL DEVELOPMENT ON HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The biggest strength of the Company has always been its people. Only with their participation we have managed to achieve a healthy work culture, transparency in working, fair business practice and a passion for efficiency. The Company follows a unique, home grown philosophy of allowing people to set their own targets and give them the freedom to achieve: ‘I can. This philosophy has spread across all our employees and has been a constant source of motivation for our people. Further, to enhance their skills and enrich their experience, the Company provides continuous training. This includes workshops, courses, seminars and visit to the Companys plants. Of late, we have also started in-house conferences for various disciplines. Employees from all our offices are invited to participate. It is a useful forum for sharing experiences, ideas, innovations and developmental work undertaken in their respective work places. From the beginning, we have followed a progressive policy of taking keen interest in the well-being and progress of our people. All of this, we believe, has nurtured a strong sense of belonging among our people.

10 CAUTIONARY STATEMENT:

Statement in the Management discussion & analysis describing the Companys objectives, projections, estimates & exceptions may be "forward looking statements" within the meaning of applicable securities laws & regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Companys operations include economic conditions affecting demand/ supply and price conditions in the domestic & overseas markets in which the Company operates & changes in the Government regulations, tax laws & other statutes & other incidental factors.

	For and on behalf of the Board,
	Sd/-
Place: Mumbai	Ratanlal Mardia
Date: September 2, 2013	Managing Director