polynova industries ltd Management discussions

POLYNOVA INDUSTRIES LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONS: During the year the turnover has gone up by about 33% and operating profit has gone up by 33%. The Company continued to perform better in the US market but the appreciation of rupee kept margins under pressure. The main raw materials like PVC Resin, Plasticizer, Textiles and Solvents continued remain high which put pressure on profitability. The effect of the entire cost increase could not be passed on to the customers because of the companys contract pricing with OEM customers and competition from smaller manufacturers. There was also substantial increase of Power and Fuel cost on account of increase in oil prices. However, the company in the current year has taken substantial efforts to offset the cost increase and appreciation of US dollar. Adequate measures are also being taken to keep the power and fuel costs under control. EXPORTS: The Company has achieved Export Turnover of Rs. 3209.05 lacs on CIF basis. Exports have gone up by about 67% over the previous year. The Company has gained substantial market share in the US After market Automotive Sales and Marine Industry. Your company has also got approval from some of the top OEM customers in US which apart from boosting substantial volume/ profit will establish leadership to your Company in the US market: OUTLOOK: Your company is already a dominant player in the Automotive Industry and has substantial presence in US automotive sector. Your Company has already commenced supplies to two major Automotive OEMs. This has given substantial credibility to your Company in the US Market resulting in many other customers approaching the Company with long term plans. India is projected to be next major hub for the automobile auxiliary industry. Many of the top automobile manufactures are on the anvil of setting up plants in India. Being a major player in the automobile segment your company is going to gain substantially from this. Your company has developed a range of new products catering to niche segments. These products are highly technical and can generate good volumes and profits. Government of India - Ministry of Defense, Directorate General of Quality Assurance, and Controller of quality assurance (Textiles & Clothing) Kanpur has approved our facilities and has graded the same as Grade I. This is for the first time that a leather cloth manufacturer in India has been graded so. Ordnance Equipment Factory - Kanpur has given your company a big order for the supply of Coated Fabrics. Your company is also in the process of developing import substitutes for Defense Industry.