Parekh Aluminex Ltd Directors Report

PAREKH ALUMINEX LIMITED ANNUAL REPORT 2011-2012 DIRECTORS REPORT Dear Shareholders, Your Directors take pleasure in presenting the Eighteenth Annual Report together with the Audited Accounts for the financial year ended on March 31, 2012. FINANCIAL RESULTS: (Rs. in Millions) Particulars March 31, 2012 March 31, 2011 Income Net Sales (Net of Excise duty) 13,697.53 9,023.46 Other Income 36.48 17.82 Total Income 13,734.01 9,041.28 Expenses Consumption of R.M. 10,297.04 6,770.17 Other Expenditures 919.95 654.17 Total Expenses 11,216.99 7,424.34 Profit before finance cost and depreciation 2,517.02 1,616.94 Finance Costs 714.36 363.07 Depreciation 599.23 441.86 Profit before tax 1,203.43 812.01 Tax Expenses * Current 255.00 160.00 * Mat Credit (11.67) 0.00 * Deferred 113.50 (20.50) Net Profit after tax 846.60 672.51 Appropriations Proposed Dividend 51.76 45.29 Tax on Dividend 8.40 7.70 Debenture Redemption Reserve 148.90 67.60 General Reserves 85.00 67.50 Balance carried forward 2,214.45 1,670.57 FINANCIAL PERFORMANCE: The Company for the period ended March 31, 2012 recorded a turnover of Rs.13,697.53 million, as against Rs. 9,023.46 million for the period ended March 31, 2011. The profit before tax is Rs. 1,203.43 million for the period ended March 31, 2012, as against Rs. 812.01 million for the previous period. The profit after tax is Rs. 846.60 million as against Rs. 672.51 million for the previous period. TRANSFER TO RESERVES: During the year under review, the balance transferred to General Reserve amounts to Rs. 85 million as compared to Rs. 67.50 million for the previous year. DIVIDEND: The Board of Directors of the Company has recommended a dividend of Rs. 4/- per share, i.e. 40% aggregating to Rs. 51.76 million. Together with corporate dividend tax of Rs. 8.40 million, the total payout works out to Rs. 60.16 million. The dividend, if approved, shall be payable to the shareholders registered in the books of the Company and the beneficial owners as per details furnished by the depositories as on September 29, 2012. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND: The Company has transferred a sum of Rs. 0.14 million in respect of unpaid/unclaimed dividend for the Financial Year ended March 31, 2004 to the Investor Education and Protection Fund of the Central Government as required under Section 205C of the Companies Act, 1956. DIRECTORS: In accordance with the provisions of Section 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Vikram Mordani retires by rotation at the ensuing Annual General Meeting of the Company and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment as Director of the Company. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm that:- 1. In preparation of the Annual Accounts for the year ended March 31, 2012 the applicable Accounting Standards have been followed along with proper explanation relating to material departures; 2. They have selected such accounting policies in consultation with the Statutory Auditors and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended March 31, 2012 and the profits of the Company for that year; 3. To the best of their knowledge and information, they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; 4. They have prepared the Annual Accounts on a going concern basis. PUBLIC DEPOSITS: Your Company has neither accepted nor renewed any deposit within the meaning of Section 58A and 58AA of the Companies Act, 1956 and rules made thereunder during the year ended March 31, 2012. AUDITORS: M/s. C. V. Pabari & Co., Chartered Accountants, Mumbai, the Statutory Auditors of the Company, who would be retiring at the conclusion of the forthcoming Annual General Meeting have expressed their inability to continue as the Auditors of the Company. The Company has received special notice as required under Section 225 of the Companies Act 1956 proposing the appointment of M/s. Chaturvedi & Shah, Chartered Accountants, Mumbai (FRN 101720W) as the Statutory Auditors of the Company. M/s. Chaturvedi & Shah, Chartered Accountants have forwarded to the Company certificate stating that the appointment, if made, will be within the limit specified in Section 224(1B) of the Companies Act, 1956. Your Directors recommend their appointment as Statutory Auditors of the Company for the Financial Year 2012-13 and to hold office up to the conclusion of the next Annual General Meeting of the Company. COST AUDITORS: Pursuant to the provisions of Section 233B of the Companies Act, 1956 and in terms of order no. 52/26/CAB-2010 dated June 30, 2011 issued by Central Government, and subject to the approval of the Central Government, the Company has appointed M/s. Kasina & Associates, Cost Accountants (FRN 01303) as the Cost Auditors of the Company for Audit of the cost accounting records for the financial year 2011-12 and 2012-13. MANAGEMENT DISCUSSION AND ANALYSIS: A detailed review of operations, performance and future outlook of your Company is given in the Management Discussion and Analysis, which forms part of this Report. CORPORATE GOVERNANCE: Your Company is compliant with the requirements of Clause 49 of the Listing Agreement. Necessary disclosures have been made in this regard in the Corporate Governance Report. A certificate from the Statutory Auditors of your Company regarding compliance with the requirements of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report. The report on Corporate Governance is included and forms part of this report. LISTING: The equity shares of the Company continue to be listed on BSE and NSE. The annual listing fees for the financial year 2012-13 have been paid to the Stock Exchanges. PARTICULARS OF EMPLOYEES: As required under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employee) Rules, 1975, as amended, details of employees who were in receipt of remuneration exceeding the limits as prescribed under the said Section is given as below: CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO: Information as per Section 217(1)(e) read with the Companies(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended March 31, 2012 are as follows: CONSERVATION OF ENERGY: The Company has a strong commitment towards energy conservation for the benefit of the nation and itself. Efforts to optimize process parameters, modernize & upgrade technology as well as equipments, with the objective of increasing energy productivity are continuous and ongoing. Company ensures optimization of resources and is committed to control wastages and avoid air and water pollution. Water is used on minimal basis. Company in order to conserve energy and fuel, have installed high speed globally accredited automatic machines which has higher productivity and thus consumes less power. Company has a strategy of recycling of certain waste and thus conserves energies. Automatic loading area, specialized warehousing saves extra movement of vehicles and thus saves fuel and power. Company has aspirators with scrap bailing system to reduce scrap% and increase productivity. TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT AND RESULTANT BENEFITS: Company has unique innovation strategy and has developed and trained human force to adopt international technology to be used in process. Company has automatic packing unit for foil containers and household foils which increases productivity and reduces manual handling and well equipped in- house tool room for machine and mould maintenance having leath machine, surface grinder drill machine, surface grinder, bench grinder. New stackers developed for semi automatic machines which has increased productivity and minimized manual handling of the product. Company is market leader in India due to its technical innovation and focus on continues upgrdation. Company has philosophy of continues review and development of new innovative process. FOREIGN EXCHANGE EARNINGS AND OUTGO: During the year Companys foreign exchange transactions are as follows: [Rs. in Millions] Particulars March 31, 2012 March 31,2011 Foreign Exchange earnings 1,626.43 924.79 Foreign Exchange outgo 2,118.82 1,265.72 APPRECIATION: The Directors acknowledge with gratitude and wish to place on record their deep appreciation of the continued support and co-operation received by the Company from the various Government authorities, Shareholders, Bankers, business associates, customers and Financial Institutions during the year. The Directors place on record their deep appreciation of the dedication and commitment of your Companys employees at all levels and look forward to their continued support in the future as well. For and on behalf of the Board of Directors Amitabh Parekh Chairman and Managing Director Place: Mumbai Date : August 25, 2012. MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT: India has witnessed a huge transformation in economic and social growth resulting into emergence of the large Aluminium container and Kitchen Foil Industry. This industry predominantly was run as small scale operations by individual operators but has been transformed into organized structured Industry recognized as Packaging products mainly in Food sector, Caterings, Railways, Airlines, Hotels, Restaurants, etc. Aluminium being biodegradable and good for Food packaging, the Industry is gradually migrating into a FMCG sector. Further the product application for Aluminium containers has been into Health and Hygiene sector also like Hospitals and Health centres resulting into a sector being termed as Aluminium Consumer goods sector. Currently India has limited players in organized sector in Aluminium Containers and Kitchen Foils. Hardly couple of players may fall in category of unorganized and organized players while on small scale and local area basis there may be few more who have insignificant share in market making. The Country has been seeing huge demand of this products due to increased urbanization and hygiene awareness resulting into growth by existing players and also few global Companies are trying to market their product initially and may get into operations as and when they find the market ready for their products. Further the Company is constantly introducing newer products for newer application for newer markets; thereby increasing the overall market of the products. FINANCIAL PERFORMANCE: Economic growth in India during the last year has distinctly slowed down. Industrial growth was soft and not in a buoyant mode. There was no encouraging reports from Indian Exports. Despite the gloomy situation, Parekh Aluminex Limited (PAL) registered a sales growth of 49% in the domestic market and 73% in the export market. EBIDTA grew by 56% and profit after tax grew by 26%. Domestic Sales grew as a result of the Companys expanding market presence due to increase in applications of the product, enhanced need for hygiene and awareness about the eco friendly nature of our products. The Company also started sales to big retailers like Bharti Walmart, Reliance, Big Bazaar etc. Export business grew with growth coming from US and UK markets. EBIDTA to Sales was 17.92% last year, this year it is 18.38%; there is an improvement of 2.57% due to economies of scale and better efficiencies. Net Profit to sales was 7.45% last year, whereas this year it is 6.18%. The deterioration is due to high finance cost as compared to last year due to higher borrowings. Since the Company has entered absolutely nascent retail market of foil containers & foil rolls, with more than 250 varieties the inventories have gone up. OPPORTUNITIES: The young population, urbanization, international exposure to the current people, environmental rules and regulations, nuclear family concepts, huge demand for improved hygiene levels, huge growth in retail markets, provides huge opportunities to scale up this business and industry will see huge multiple growth in years to come. THREATS: * Substitution with other packaging material * Not meeting the demand due to production constraints * Managing the new retail business viz: logistics, selling chain, etc. However substitution product to be successful needs to be cheaper, eco- friendlier and better than the Companys products. Company shall plan expansion in advance to meet the demand and with a strong new management team the new retail business should be able to be managed effectively. RISKS AND CONCERNS: All the plants of the Company are at one location. Due to that Company derives huge economies of scale & efficiencies. But there is always a risk of any natural/unnatural eventualities occurring; that shall effect the entire operations of the Company. Since Company is entering retail sales; there would be challenges over supply chain, logistics etc. inventories and debtors level is expected to be high till such time that the retail business stabilizes. Demand not matching up with the supply as by the end of 2012-13 production capacities of the Company would be almost at the optimum utilization. There could be a slight drop in the bottomline in case of finance cost going up. CURRENT YEARS OUTLOOK: Going forward Company plans to focus more towards retail business, product brand building, develop custom made products for food chains. This will result in a fundamental change in perception about the Company and there will be lots of value addition thereby increasing the bottom line of the Company. Branding of the Companys product range will also improve the image of the Company. Company has also started sales of coloured foil containers and foil rolls, which not only gives edge to the product line but also creates value additions. Company is also in process of putting various systems/processes in place, so that eventually the Company is system/processes driven. We are also in the process of building a much stronger and professional team in various faculties to facilitate smooth working. Based on Companys order book position and execution capabilities; we are hopeful of achieving 40% growth in the topline of the Company. We also expect to increase our retail business share. This year the team, logistics, branding and advertisements would be in place along with the entire supply chain to launch the retail packs of foil containers and foil rolls. We target to have everything in place by this year end so as to kick start the business from early next year onwards. In the current year we shall also be exploring new markets for exports. Overall we look to the immediate future with optimism & sense of well being.