south west port ltd share price Management discussions

SOUTH WEST PORT LIMITED ANNUAL REPORT 2007-2008 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW: The financial year 2007-08 has stabilized the business for South West Port Ltd, the only Deep Draft Port in Western Shores of India. As a company it has achieved handling 4.40 Million MT with a rated capacity of 7.50 Million MT. The third phase of the project was duly completed and commissioned in November 2007 and has enhanced the handling capacity from 6.00 Million MT to 7.50 Million MT. OPERATIONAL PERFORMANCES: Operational Parameters 2007-08 2006-07 2005-06 2004-05 (A) Vessels Berthed (Nos.) Panamax 67 57 37 31 Handimax 11 5 10 2 TOTAL 78 62 47 33 (B) Cargo Handled (MMT) Coal 3.44 3.38 2.61 2.1 Coke 0.56 0.35 0.14 - Lime Stone 0.18 0.28 0.27 0.04 HR Coil & Slab 0.22 - - - TOTAL 4.40 4.01 3.02 2.14 Growth over previous year 10% 33% 41% - (C) Berth Occupancy (%) 49% 42% 41% 62% (D) Vessel Turnaround (Days) 4.6 4.1 4 7.9 (E) Average Discharge per weather working day (MT) Coal 29,145 27,032 22,087 14,043 Coke 23,176 20,979 20,267 - Lime stone 26,604 21,138 20,203 16,200 HRC Coil & Slab 7,643 - - - THE GLOBAL ENVIRONMENT: The world economy grew by 3.5% in year 2007 as against 3.8% in year 2006. The slowdown was led by the US where growth slowed from 2.9% to 2.2% in the corresponding years. As contrary to this, the Asian Majors, China & India are targeting the magical growth rate of 10% + during last two years. The demand for steel worldwide is expected to sustain over the coming years. This optimism is based on important factors. This is because of largely due to the growing consumption pattern of emerging economies. One of the biggest economies, the Chinese, has mandated a closure of 100 Metric Ton Per Annum (MTPA) iron-making and 55 MTPA steelmaking capacity upto 2010 in a phased manner to be replaced with global standard facilities. In BRIC economies the CAGR of steel consumption has grown by 16% in 2006-07 as against the world steel consumption growing at 7% CAGR. This has been driven by huge investments in infrastructure development activities. INDIAN STEEL INDUSTRY: With a capacity of around 60 MTPA, the Indian steel industry has produced about 54 MTPA during the previous year, out of which about 8% was exported. Average per capita steel consumption was slightly increased from 42 kg to 47 kg in urban where as in rural India it still hangs around 2 kg per person. OUR GROWTH OPTIMISING INITIATIVES: Indian economy continued to perform well with real GDP growth of around 8.5% and remained one of the fastest growing economies in the world. Government of India continues to provide, in its annual budget, for major expenditure outlays on infrastructure like highways and ports. JSW Group, the Promoter of this company, is emerging as a big global steel maker by getting closer to clients and strengthening their presence in profitable geographies. They have already established in USA and Europe. Venturing into Latin America and Africa are to be initiated in the year 2008. Domestic side, there is a substantial investments in increasing its Vijay Nagar Steel plant from 4.5 mmt to 10.0 mmt. This is expected to provide new growth opportunities for our company. CHALLENGES: The dry bulk cargo / raw materials of steel namely coking coal and iron ore prices are still at historically high levels. This affects the growth of steel makers and hence the. intake of raw materials. Also the Mormugao Port Trust has come up with a plan to develop another mechanized coal handling facility next to our Terminal, with a planned capacity of 7 million MTPA. This facility may be ready for operation by year 2011. The Company faces normal business challenges of market competition in its business. The company adopts suitable business strategies to counter these challenges enabling the Company to maintain satisfactory performance. KEY INITIATIVES: Installed 3rd Mobile harbor crane to augment coal handling facility as well as to use in export of steel. Also installed power back up (DG Set) to have an uninterrupted power supply for the Terminal. OUTLOOK: The Company will continue to maintain its focus in the infrastructure sector while addressing new opportunities, which would enable enhancement of shareholders value. RISKS AND CONCERNS: As a part of the overall risk management strategy, the Company consistently insures its assets and operations against a wide range of risks. The Company continues to follow a suitable strategy to modify its risk profile by eliminating and significantly reducing key business risks. ADEQUACY OF INTERNAL CONTROL: The Company has a proper and adequate internal control system commensurate with its nature of business and meets the following objectives. * Efficient use and safeguarding of resources. * Compliance with polices and procedures; and * Transactions being accurately recorded and promptly reported. Human Resources and Industrial Relations: The Company has a team of able and experienced professionals. The Company believes that the quality of its employees is the key to its success in the long run. The Company continues to have cordial relation with its employees. It employs 49 persons and provides personal development opportunities and all round exposure to them. Environmental Initiatives: Beyond the socio-economic impact of our business, we are conscious of the environmental impact of our operations. As a responsible corporate citizen, we act on the belief that environment protection and enrichment are not just preferred responses but our responsibility and the right way to do business. South West Ports commitment is reflected in various initiatives at all stages, right from technology selection, design requirements and location identification leading upto a end use of our services. Dust Pollution Monitoring systems have been installed in the city under the guidance of Pollution Control Board, Goa unit to keep a continuous check on the level of pollution and we can proudly say that the level has been kept under check. Further to above, importance has been given to increase greenery in the surrounding area by doing and maintaining on a regular basis.