p r cements ltd Management discussions

P.R. CEMENTS LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS ECONOMIC REVIEW INDIAN ECONOMY: The Indian economy has undergone a tough phase in the year 2011-12. The growth was impacted by both the deteriorating global economy and various domestic issues like high interest rates, inflation, infrastructure constraints, lack of political consensus and liquidity crunch among others. Besides, a fragile external account has caused depreciation of rupee in the backdrop of volatile global risk sentiment. Indian GDP growth is restricted to 6.5% (at factor costs) in financial year 2011-12. OUTLOOK: The Union Budget 2012-13 has announced measures to augment the supply side response of the economy to maintain price stability and growth. The service sector comprising 57% of GDP is expected to come down from 9.4% in 2011-12 to 8.7% in 2012-13 on account slackening demand from hotels, transportation, communication, community, social and personal services. The industrial segment on the other hand is expected to improve from 4.5% in 2011-12 to 5.6% in 2012-13 on account of expected money easing by RBI. The agricultural sector is expected to clock in a flat growth of 3% in 2012-13 in the event of normal monsoon. Considering these domestic factors and a mild improvement in global macro- economic scenario, the GDP growth is expected to return back to the levels of 7% in 2012-13 INDUSTRY STRUCTURE AND DEVELOPMENTS: The financial year 2011-12 has been one of great challenges to the Indian Economy. The challenge of sustaining the economic growth amid constraints of price stability ultimately resulted in the slowdown in growth to less than 7% after nearly five years of consistent growth. The Agriculture and Services sector continued to show healthy growth and the slowdown can be fully attributed to the Industries sector. But considering the turmoil in major world economies, India still can be said to be in a more healthy scenario poised for an upward movement in growth. The Cement Industry showed a reduced growth of around 7% in tune with the reduced Industrial growth. Cement production and dispatches during the financial year 2011-12 grew by about 6.50%. The capacity grew by about 2.5%, but the capacity utilization was again less than 80%. OPPORTUNITIES, THREATS, RISKS, CONCERNS AND OUTLOOK: It has been estimated that by 2016-17, the Demand for Cement in India would be to the tune of 407 Million Tonnes based on the estimate that the economy would grow at the rate of 9% during the XII Plan period of 2012-13 to 2016- 17. This entails a growth chart for Cement Industry in excess of 10%. The Cement Industry has been actively advocating concretizing/White Topping of roads in the country as Cost effective in terms of longevity and economical in maintenance. The Central and State Governments is fast realizing the benefits of Concrete Roads/White topping and it is expected that Indian Roads in the future would be increasingly concrete. Notwithstanding any major volatility in the world economy and its cascading effect in the Indian Economy, the future looks to augur well for the Indian Industry and Cement in particular. Your Company is primarily engaged in manufacture and sale of OPC 53 Grade Cement. The plant is strategically located at Yepala Madhavaram of Mallacheruvu Mandal of Nalgonda District, A.P and, it is nearly 228 Kms from Hyderabad and 28 Kms from Kodada on the Hyderabad-Vijayawada National high way, and having easy access to supply all over AP, Chennai, Karnataka and Orissa markets. The plant is having a capacity of 300TPD, operating with Vertical Shaft Kiln Technology. The major strength of the company is for its high quality of the product and its location. In spite of acute power cuts, the Company has achieved 68 % production capacity. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY: The Company has got an adequate system of internal control in place commensurate with the size of its operation and is properly designed to protect and safeguard the assets of the Company. There is a proper system for recording all the transactions which ensures that every transaction is properly authorized and executed according to the norms. The Company has developed an in-house Internal Audit Department which is contributing to the continuous process of sharpening the Internal Control mechanism by introduction of various concurrent audit systems and facilitating regular evaluation of the system by the management. INDUSTRIAL RELATIONS: The Employees at all ranks of the Company have been extending their fullest co-operation for the smooth conduct of the affairs of the Company and maintenance of cordial Industrial relations. The Directors wish to place on record their appreciation to the employees of the Company at all levels. CAUTIONARY STATEMENT: Statements made in this Report, including those stated under the caption Management Discussion and Analysis describing the companys objectives, expectations or projections may constitute forward looking statements within the meaning of applicable securities laws and regulations. Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting the selling prices of finished goods, availability of inputs and their prices, changes in the government regulations, tax laws, economic developments within the country and outside and other factors such as litigations and Industrial relations. The Company assumes no responsibility in respect of the forward looking statements which may undergo changes in the future on the basis of subsequent developments, information or events.