raychem rpg ltd Management discussions

RAYCHEM RPG LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS 1. FINANCIAL HIGHLIGHTS Particulars Year Ended Year Ended 31.03.2007 31.03.2006 (Rs. lacs) (Rs. lacs) Profit Before Depreciation 4,010.11 3,136.03 Less: Depreciation 271.88 303.92 Profit Before Taxation 3,738.23 2,832.11 Less: Provision for Taxation 1,326.09 905.87 Net Profit 2,412.14 1,926.24 Profit Brought Forward from Earlier Year 2,797.39 2,090.00 Surplus Available for Appropriation 5,209.53 4,016.24 Appropriations: - Proposed Dividend on Equity Shares 1,050.00 900.00 - Tax on dividend 178.45 126.23 1,228.45 1,026.23 Transfer to General Reserves 241.21 192.62 Balance Carried Forward 3,739.87 2,797.39 TOTAL 5,209.53 4,016.24 2. OPERATIONS The Companys performance during the financial year ended 31St March, 2007 was satisfactory in another year of challenging business environment. Given below are brief comments on the state of affairs of the various businesses in which the Company is actively involved. A. Industry Scenario Analysis The business of the Transmission and DistributionDivision registered a growth of 37% over previous year. It was the strategy of the Company to diversify the portfolio of Services as a vehicle for the growth of the divisions business. During the current financial year, Services & Contracts Division was formed to provide a major thrust in the revenue growth. During the year the contribution from the said division was 25% of the total revenue of T & D division. Another avenue for growth is the introduction of new products. The Insulated Bus Bar introduned during the year 2004-05 generated a turnover of over Rs. 11.47 crores during the financial year 2006-07 as against turnover of Rs. 6.14 crores during the previous year with the expansion of customer base. The sales of Telecom Division were flat during the year. The slow down in sales of copper products was compensated by the growth in fibre products. The profitability has been satisfactory. The Corrosion Protection Group Division had another good year in its history as it registered a growth of 67% over the previous year. There has been all round improvement in market conditions for the hydrocarbon industry which is expected to continue in future. The entry of the division in Internal Pipe Coating business has been quite successful and this area of business is likely to provide the Company with major opportunities during the coming years. Exports increased from Rs. 35.11 crores to Rs. 46.97 crores. The increase in sales was both from Tyco entities as well as from non-Tyco customers. This growth has been mainly because of the performance both in terms of the product quality as well as the reliability, which is offered to our customers. Also introduction of new products contributed to the growth. The Company was able to attract business from a host of new customers located around the globe. The RCP Divisions business registered a growth of 50% during the financial year. The profitability has been satisfactory. The Industrial Electronics Division registered a sales growth of 72% over the previous year. The same was due to addition in the existing product range as well as new products. OPERATIONS AND RESEARCH & DEVELOPMENT The operations at Vasai and Kalher Customer Care Centre continue to be smooth and problem-free. The Quality standards maintained at the manufacturing facilities continue to be of very high level, as reflected in the lower level of customer complaints and higher levels of satisfaction of our customers, as seen from our Customer Satisfaction Surveys. During the year, Total Productive Maintenance (TPM) activities were further strengthened at the Vasai Plant. During the year the Company commenced operations at its new manufacturing facility at Chakan, Pune with manufacture of Surge Arrestors. Also the proto-type of Gas Meter is ready. The construction work of additional building for housing the facility for manufacture of Transformers is in progress and the first proto-type of VPI transformer manufactured at Chakan has been successfully type tested. The Company has set up an EOU at its existing facility at Vasai and the production and dispatches have commenced during the year. INFORMATION TECHNOLOGY The Company has been constantly striving to be at the forefront of information technology and has upgraded to the latest technology and equipment to gain competitive strengths during the year under review. CUSTOMER FOCUS The Company continues to enjoy the preferred status among its customers in all the major product categories. FINANCE The working capital usage has been very satisfactory during the year under review. The Company has maintained the highest credit rating of SB-1 from its Lead bank viz., State Bank of India. The Company will continue to maintain its focus on improving working capital management and improve internal process flows for better response. The Company has tied up with the banks for funding of new projects and acquisitions. The Finance Division continues its efforts to minimise cost of funds and improve visibility of cost data for better pricing decisions. CONTRIBUTION TO SOCIETY The Company continued its efforts started in the earlier years towards making its due contribution to community relief, social welfare and development as a part of its commitment towards social cause. B. Performance Analysis Inspite of the challenging business environment that prevailed in the industry during the financial year under review as stated above, the Company has posted a satisfactory growth in Sales as compared to the previous financial year. The Company achieved a total turnover of Rs.249.80 crores during the current financial year ended 31st March 2007 as compared to a total turnover of Rs. 185.52 crores achieved during the previous year. The Company had undertaken several marketing, product portfolio expansion, market penetration and cost reduction initiatives in the current financial year. Due to these measures, the profits before tax increased to Rs. 37.38 crores in the current financial year from Rs. 28.32 crores during the previous year.