synthetics & chemicals ltd share price Directors report

ANNUAL REPORT 1999-2000 TANFAC INDUSTRIES LIMITED DIRECTORS REPORT The Board of Directors have great pleasure in presenting the 26th Annual Report along with the Audited Accounts of the Company for the financial year ended 31st March 2000. OPERATIONS AND OVERALL PERFORMANCE: The sales turnover for the year was Rs.6441.37 lakhs as compared to Rs.6421.44 Lakhs in the previous year registering a marginal increase of 0.31%. The Gross profit has decreased from Rs.1194.64 Lakhs in the previous year, to Rs.719.45 Lakhs in the current year. Net profit has decreased to Rs.407.21 lakhs as compared to Rs.741.48 lakhs of the previous year The drop in profitability was mainly due to :- (a) steep decrease in sales price realisation of DCFA due to dumping of DCFA and Ciprofloxacin by Chinese Suppliers. As a result, the Company had to sell the product at unremunerative prices resulting in significant contribution loss. (b) Increase in fuel cost, effective from October, 1999. (c) drop in sales realisation per MT of HF Acid from domestic and overseas customers due to market competition. (d) increase in interest & depreciation charges due to commissioning of new DCFA Project. DIVIDEND: Your Directors recommend payment of dividend on equity shares at the rate of 11%. The dividends in the hands of shareholders are tax free, as the tax on dividend would be borne by the Company. [Rs. in Lakhs] Current Previous year ended year ended March 31,2000 March 31, 1999 Dividend outgo 109.73 169.57 Tax on Dividend at 10% 10.97 16.96 Total Outgo 120.70 186.53 The Company has made necessary provision for tax on dividend in the books of accounts. The dividend, if approved by the Shareholders at the ensuing Annual General Meeting will be paid to those Shareholders whose names appear in the Register of Members of the Company as on date of the Annual General Meeting. PROSPECTS Aluminium Fluoride The order position for 2000 - 2001 is satisfactory. Your Company has been consistently maintaining the leadership position in the Domestic Market of Aluminium Fluoride with 52% Market Share. As the International Prices have come down substantially, your Company is not able to make a breakthrough in the overseas market. However, your Company is exploring possibilities to export Aluminium Fluoride to Australia, New Zealand and middle East markets during the current year. HF ACID Leadership position is being maintained by the Company in the Hydrofluoric Acid (HF Segment). The Companys order position is good. During the year, the Company has developed new overseas market in Thailand. Quality of the product has been accepted by the Customer and we are hopeful of achieving significant business . DIVERSIFICATION SCHEME: Organo Fluorine Project The new project for manufacture of Dichloro Fluoro Acetophenone (DCFA) was commissioned in February 1999. DCFA is used as an intermediate chemical in the manufacture of new generation bulk drugs namely Ciprofloxacin and Enrofloxacin. During the year, your Company produced and sold 35 MT of Di-chloro Fluoro Acetophenone (DCFA) to various drug manufacturers. However during the year there has been a steep decrease in the sales price realisation of DCFA due to dumping of DCFA and also Ciprofloxacin (Bulk Drug) by Chinese Companies, forcing the Company to sell the product at unremunerative prices. At the present Market Price, it is not economically viable to operate the plant. Hence the production of DCFA has been suspended and will resume production after DCFA price stabilises at a reasonable level. Your company is also exploring the possibilities of manufacturing alternate products to make use of the existing facility and is in touch with major international Fluorine manufacturing Companies for developing new products. INVESTMENT IN COMMON EFFLUENT COLLECTION & MARINE DISPOSAL SYSTEM: The Common Effluent Collection and Disposal system conceived by your Company in association with other member companies of the Sipcot Industrial Complex has been successfully commissioned. RESEARCH AND DEVELOPMENT: Currently our R&D efforts are focussed on developing alternate Organo Fluorine Products. Samples of various new organic fluorine products have been sent for approval to prospective customers. Your Company is hopeful of commercialising the new products developed, on getting positive feed back from the customers. Also the Companys R & D efforts are focused on improving the existing production systems, taking effective steps for efficient pollution control and ensuring safety in the process. ENVIRONMENT, SAFETY AND POLLUTION CONTROL: As the Share holders are aware, Environment Protection, pollution Control Measures and Social Welfare activities form an integral part of the Companys Operations. Your Company has been taking proper care in complying with all the statutory requirements relating to Safety, Environment and Pollution Control. Mock Safety drills are being carried out periodically and the employees take all precautions for the safe operation of the plant. Your Company has been awarded ISO 14001 by The Det Norske Veritas, Netherlands for establishing the Environment Management System Standards [EMS]. The objective of the EMS is to protect human health and environment from the potential risk impact of our activities, products and services. TOTAL PRODUCTIVE MAINTENANCE Your Company has received the prestigious TPM Excellence Award 1999 - First Category in March 1999 from Japan Institute of Plant Maintenance (JIPM) for successfully implementing TPM which has helped the company to achieve Zero Break Down, Zero Stoppages, Zero Accidents and Zero Losses. Your Company is the First Fluorine manufacturer in the world and the third Company in India to get this coveted award. Your company is in the process of implementing the second stages of TPM for achieving Consistency Award. OTHER QUALITY AWARDS Your Company has also received Rajiv Gandhi National Quality Award 1998 Commendation Certificate from prestigious BUREAU OF INDIAN STANDARD and GOLDEN PEACOCK NATIONAL QUALITY AWARD - 1999 - Runners up from Institute of Directors in recognition of manufacturing excellence and Total Quality Management being practiced by the Company. DIRECTORS: Tvl. B. Chandran, K.S. Ramanujam and S. S. Mahansaria are retiring by rotation and being eligible, offer themselves for re-appointment. AUDITORS & AUDITORS REPORT: M/s. Bhaskaran & Krishnan and M/s. Singhi & Co., Chartered Accountants, Chennai, the Auditors of the Company retire at the conclusion of this Meeting and are eligible for re-appointment. The observations made in the Auditors Report are self-explanatory and therefore do not call for any further comments under Section 217 (3) of the Companies Act, 1956. PARTICULARS OF EMPLOYEES: Particulars of Employees as required to be furnished Under section 217 (2A) of the Companies Act 1956, and the rules framed thereunder are furnished in the annexure to this report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGO: As required under Section 217 (1) (e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, a statement containing the particulars relating to conservation of energy, research and development and technology absorption is annexed INDUSTRIAL RELATIONS: Employee relations continued to be cordial throughout the year. Their whole-hearted support in implementation of TPM, ISO-9002 systems and ISO 14001 amply demonstrate team work and co-operation between them and the management. HUMAN RESOURCES DEVELOPMENT: Human Resources Development forms an integral part of your Companys corporate philosophy. During the year, several training programmes were conducted to enhance the competence levels of the employees. Y2K COMPLIANCE: The Companys system are fully Y2K Compliant. Your Company has incurred an amount of Rs.18.24 lacs for replacement of hardware and upgradation of software to meet Y2K requirements. ACKNOWLEDGEMENT: Your Directors wish to thank the Government of India, Government of Tamilnadu, Financial Institutions and the Banks for their continued guidance, help and support. Your Directors would also like to express their sincere appreciation to M/s. BUSS, Switzerland, M/s. CHENCO, Germany and M/s. Dalian Ftz Luyuan F-Chem Ltd., China, for their continued Technical Support and JIPM, Japan for their continued assistance in TPM Activities. On behalf of the Directors and the Shareholders, I place on record my appreciation of the commitment of the members of TANFAC family consisting of officers, staff and workers and their hardwork in ensuring the success of our Company. For and on behalf of the Board Place : Chennai, P. SABANAYAGAM Date : 8th April, 2000. Chairman ANNEXURE TO DIRECTORS REPORT Information under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31st March, 2000. CONSERVATION OF ENERGY The Company has adopted various measures to conserve energy and has taken several measures including regular monitoring of consumption and improved maintenance of systems. RESEARCH AND DEVELOPMENT AND TECHNOLOGY ABSORPTION A. Research and Development The Company is adopting various cost reduction measures to make the production cost effective. The Company is seriously making efforts in R&D to develop new high value products which can be produced with facilities available in Organo Fluoro Chemicals Plant. The progress achieved in the above areas are summarised below: The R&D team has developed an agrochemical intermediate, the sample of which has been approved by a Multinational Company in Germany. The team is now exploring the possibility of producing the product on Commercial Scale. Besides the above achievement, the Company is continuously working on development of new Pharma/Agro Intermediate Products. Also the Company is vigorously interacting with other multinational companies for strategic tie-up to manufacture speciality chemicals in the existing facilities. The R&D efforts are also on in identifying the potential end use for the effluent sludge generated in the process. Your Company has been awarded the most prestigious TPM EXCELLENCE AWARD - First Category for implementation of Total Productive Maintenance (TPM) from Japan Institute of plant Maintenance (JIPM) for achieving zero customer complaints, zero defects and zero losses. This has helped the Company to implement quality measures, cost reduction measures, improvement in the overall equipment effectiveness thereby increasing productivity. The Company has also been awarded the Rajiv Gandhi National Quality Award and Golden Peacock Award for the good Quality Management Practices followed by the Company. B. Technology Absorption, Adaptation and Innovation 1. By close interaction with our foreign collaborators, we have benefited by becoming aware of the Developments taking place in most modem plants and to effectively assimilate the technology in the areas of process control and the equipment design. 2. Details of technology imported during the past five years - Year Technology Imported Status 1996-97 HF Plant capacity Expansion Implemented Fully 31 TPD to 40 TPD 1998-99 HF Plant Capacity Expansion Implemented Fully 41 TPD to 45 TPD 1998-99 Manufacture of Fluorobenzene Implemented Fully derivatives C. FOREIGN EXCHANGE EARNING AND OUTGO : (Rs. In lacs) Details 1999-2000 1998 - 1999 Exports 330.99 205.59 Forex Earned 374.98 245.31 Forex used 2272.90 1999.25 For and on behalf of the Board Place : Chennai, P. SABANAYAGAM Date : 8th April, 2000. Chairman