ossoor estates ltd Management discussions

OSSOOR ESTATES LIMITED ANNUAL REPORT 2005-2006 MANAGEMENT DISCUSSION AND ANALYSIS PROPERTY: The acreage of the property owned by the company comprises the following: OSSOOR SULGODU TOTAL (Hectares) (Hectares) (Hectares) (Acres) BEARING AREA Arabica 123.92 68.42 192.34 475.08 Robusta 149.80 32.38 182.18 450.17 Fodder grass planting 0.28 - 0.28 0.69 Roads, Buildings, Jungle, wasteland etc. 21.61 8.38 29.99 74.10 295.61 109.18 404.79 1000.04 ACCOUNTS: Rs. After providing depreciation and all other charges and before taxation the accounts for the year ended 31.3.2006 show a profit of 32,55,047 Less: Deficit brought forward from the previous year (-) 11,22,411 21,32,636 Deduct: Provision for Taxation 5,00,000 16,32,636 Excess Provision for taxation (Nett) 7,87,578 Balance carried to Balance Sheet 24,20,214 Due to inadequate profits, your Directors have not recommended any dividend for the year under report. No transfer to reserves is proposed. Your Directors report that there is a substantial increase in the income from sale of crops of the company during the year under review, on account of increase in production and higher realisation. However, the company having undertaken intensive cultivation in the plantation, which was not done in the previous years, on account of chronic drought and low coffee prices, there is a rise in Estate Expenditure during the year. The average realisation of the current years crop is expected to be around Rs.95,000/- per tonne for Arabica and Rs. 55,000/- per tonne for Robusta as against Rs.72,000/- and Rs.45,500/- valued for 2004-2005 crop respectively. The management is pursuing intensive cultivation policy in order to achieve higher output in the next couple of years. RESERVES: The General Reserve remains at Rs. 2,27,77,028/- The Capital Reserve remains at Rs. 1,02,63,322/- TAXATION: Necessary provision has been made for payment of income tax and agricultural income tax. CAPITAL EXPENDITURE: The details of Rs. 50,00,636/- being Capital Expenditure are shown in schedule 4 attached to the Balance Sheet. CROP AND COSTS: Crop harvested for the year is at 505 tonnes consisting of 177 tonnes of Arabica and 328 tonnes of Robusta. Considering the prevailing coffee prices and gradewise availability of coffee, the crop in stock has been valued at Rs. 60,000/- per tonne for Arabica and Rs. 50,000/- per tonne for Robusta. A comparative statement showing production and expenditure for the last three years is given below: Year Crop Estate expenditure All in cost (tonnes) per tonne per tonne per acre Rs. Rs. Rs. 2003-2004 524 39,235 46,894 26, 800 2004-2005 320 71,481 84,621 29,562 2005-2006 505 69,277 77,471 42,249 Cost of production is higher on account of intensive cultivation practices adopted and on account of increase in cost of inputs. MARKETING: The Companys produce of coffee has been sold in uncured form which has enabled the company to improve its cash flow, avoiding coffee selling expenses, curing charges and interest on borrowings. EXPORTS: During the year 2005-2006 your Company exported 151 tonnes of coffee at a F.O.B. Value of Rs. 116 Lakhs (Previous year 165 tonnes Rs. 104 lakhs). ESTATES: After the three years of drought in 2002, 2003 and 2004, the estates are back to their normal condition, holding favourable prospects for the future. Lot of improvements are on, to achieve higher production and productivity. Greater attention is being given to raise minor crops like Pepper and Cardamom.