powercell battery india ltd Management discussions
POWERCELL BATTERY INDIA LIMITED
ANNUAL REPORT 2005-2006
MANAGEMENT DISCUSSION AND ANALYSIS
Operational Review
* Current Operations
After a very healthy growth during the 12 months to March 2005, the period
of 12 months to March 2006 registered a modest 3% growth by volume for the
Indian battery market. Given this overall situation, the Companys sales
for the current 18 months period was nearly 25% lower in value over the
corresponding previous 18 months. Such decline was not related to the
market, but several internal issues including inability to supply as per
demand of the market due to an industrial unrest in the Companys
manufacturing location at Maddur.
These issues which contributed to the decline were arrested after the
takeover of the Company by EIIL, which is the largest dry battery marketer
in the country. EIIL not only brought in management expertise for quick
improvement, but also the ability to supply products from its various
manufacturing locations thereby providing enormous flexibility to your
Companys supply chain. Last 4 months during the current 18 months period
i.e., effectively the period after this takeover, your Company had a volume
growth of 3 % over the corresponding period in the previous year in line
with market growth.
After the takeover by EIIL, your Company successfully entered the very
large D Bare Bottom segment of the dry battery market. Your Company was
unrepresented in this segment and this entry will be of great benefit to
your Companys operations in the years to come-both in terms of market
share and profitability.
During the period under review the battery Industry witnessed unprecedented
rise in prices of major input materials, led by very bullish trends in
zinc, which accounts for nearly 50% of the cost of a zinc carbon battery.
Your Company was able to increase its selling prices considerably in order
to offset the rising input costs. Price increases were taken across all
products. However, there was a lag between the incurring of increase in
costs and the consequent implementation of the price increases in keeping
with the supply chain throughout. Your Company had to incur some losses due
to this time lag.
Among other operations, your Company continued to be a supplier to OEM
customers of repute. However, there was some decline in the Companys
flashlights business attributed to the same issues prevailing within the
Company prior to its takeover by EIIL. However, this business was addressed
with priority in the last 4 months of the period under review and results
seemed to be encouraging.
* Prospects
As already mentioned above, your Company was restricted by operational
constraints in the period under review, as a result of which the potential
of its brand and distribution did not get fully exploited. However, now
that it is part of a Group comprising of a very dominant Industry player,
growth fuelled by marketing and manufacturing synergies is expected to
yield quick results.
All indications point to an economic growth of 8% and such growth is
expected to reflect in the Companys performance. Accordingly, your Company
has prepared an aggressive growth plan in the forthcoming year. The plan
revolves around driving volumes in the Bare Bottom D segment and
improving upon franchise already created in the AA and other D
segments.
Branding through market level initiatives and also building a significant
distribution have been the cornerstone for your Companys success.
Significant improvement is now being sought in both branding as well as
distribution, so that these propel your Company to further success in the
years to come.
While prices of most input materials have now stabilized, zinc continues to
be in a bull run. Market level strengths of your Company will allow it to
pass on the adverse impacts whereby profitability will be protected.
Your Company will continue to focus and build on its fash lights business
operations taking advantage of its holding Company, EIILs overwhelming
dominance in that Industry.