South Asian Petrochem Ltd merged Management Discussions

SOUTH ASIAN PETROCHEM LIMITED ANNUAL REPORT 2008-2009 MANAGEMENT DISCUSSION AND ANALYSIS Industries structure and developments: South Asian Petrochem Ltd is engaged in the manufacture of Poly Ethylene Terephthalate (PET) resin, having the second largest market share of the PET industry in the country. The product is increasingly used for bottled drinks, beverage, liquor, FMCG and pharmaceutical sector. PET resin represents the building block in the manufacture of PET jars and bottles. PET bottles have manifold advantages vis-a-vis competing products. It is no wonder that PET resin has become the material of choice for the food and beverage packaging industry. Opportunities and threats: The application of PET resin is increasing due to its qualities like purity, strength, transparency, lightweight and safe attributes which makes it one of the leading materials for bottling and packaging today. The carbonated soft drinks market - the principal user of PET bottles together with beverages - an intrinsic part of everyday living in that part of the world, the FMCG sectors preference for to prefer the use of PET bottles due to usage functionality and a growing preference of consumers to view the content prior to purchase represents an attractive opportunity for companies like South Asian Petrochem Ltd. Some of the main threats to PET industry include sharp fluctuation in crude prices and PTA/MEG prices, which are the primary raw materials for the PET resin industry and to control the consequent inventory losses. Increase in production capacity of PET resins within the country and abroad, as well as the competition from polycarbonates, tetrapack and glass bottles are major threats. The Company continues to reconfigure its existing capability and maintains high quality to overcome the threats. Segment-wise or product-wise performance: The Company has two geographical segments - domestic and exports. During the year, the Company earned 58% of its revenue from overseas sales spread across 48 countries. The balance was derived from the domestic sales. Outlook: As a sensitive manufacturer, we are open to various changes in consumer preferences. The PET consumption world wide is increasing and to tap the increasing market demand, the Company is investing in its Egyptian subsidiary company, Egyptian Indian Polyester Company S.A.E. The Company is continuously looking at various cost reduction measures and hopes to maintain the current margins. The Company looks forward to greater reach and significant holding of hands with newer consumers in the years to come. The Company also expects to enhance stakeholder value through a responsible strategy directed at building value over the long-term. Risks and concerns: Risks and prospects are un-separable components of any companys business. The Directors and the Management of your Company keep this in mind in taking all decisions such that no single stakeholder is adversely affected on account of any decision taken by the Company. The Company identified various risks and constituted a Risk Management Committee, comprising heads of departments which meets regularly to assess the risks and minimise their incidence, so that the returns can be maximised. Internal control system and their adequacy: The Company introduces internal control system to ensure that all assets are safeguarded and protected against loss and that the transactions are authorised, recorded and reported correctly. The Executive Director and Sr. V P (Finance) and CFO of the Company oversee the entire internal control systems. To ensure state-of-the art monitoring and control system, the Company is maintaining its books of accounts through Oracle, E-Business Suit, an ERP Software. Further, the Company uses the service of an external firm of Chartered Accountant as internal auditors of your Company who submit reports on quarterly basis. The reports are placed before the Audit Committee and comments and suggestions made by the internal auditors are noted and implemented by the Company. Material development in human resources, industrial relation front: Employee relations in the organisation were cordial and peaceful. The Company consciously and constantly adhered to the policy of investing in human resources. Since inception, the Company successfully recruited the right personnel as per its designed employment plan. Trained personnel are there to manage its operation at various levels. The actual number of personnel employed by the Company as on 31st March 2009 was 228. Cautionary statement: Statements in this Management Discussion and Analysis Report may be forward looking statements within the meaning of applicable securities laws and regulations. These statements are based on certain assumptions and expectations of future events. Actual results could differ materially from those expressed or implied. Important facts that could make a difference to the Companys operations include economic conditions affecting global and domestic demand and supply, raw-material costs and availability, changes in Government regulations, tax regimes, economic developments within India and other factors such as litigation and industrial relations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statement, on the basis of any subsequent developments, information or events. For and on behalf of the Board of Directors Place: Kolkata P K Khaitan Date : 9th May 2009 Chairman