The Ramco Cements Ltd Management Discussions.

CEMENT DIVISION

PRODUCTION

Particulars April 2017 to March 2018 April 2016 to March 2017

Increase over previous year

(In Tons) (In Tons) (In Tons) (In %)
Clinker 71,64,750 60,67,259 10,97,491 18
Cement 93,15,855 83,10,513 10,05,342 12

SALES

During the year under review, the sale of cement was at 93.12 lakh tons, compared to 83.48 lakh tons, showing an increase of 12%. As against this, the overall growth of the cement market for the country for the year under review was about 6 to 7%.

This is the first year, the Companys production and sale of cement had crossed the 9 million mark.

There has been a decent growth in the sales in the Southern States, which is the Companys core market, except in Tamil Nadu. Due to sluggishness in economic development in Tamil Nadu, the Company could not improve its sales, compared to previous year. Scarcity of sand in the State has also contributed to the lack of growth. However, there were signs of improvement in the second half of the year under review, which are expected to continue in the current year.

The Company has grown strongly in the Eastern Markets during the year under review. This had contributed to the significant growth in the overall sales of the Company for the year. The grinding units at Kolaghat and Vizag had enabled the Company to serve the Eastern Markets efficiently, which has contributed to the increase in market share in that area.

During the year under review, the Company has exported 1.31 lakh tons as against 1.39 lakh tons during the previous year. The export turnover of the Company for the year was Rs.55.97 crores as against Rs.52.35 crores of the previous year.

COST

Average diesel price had increased by 8% during the year, which had resulted in the increase in transportation cost of both raw materials and finished goods.

During the year, cost of Pet Coke and Coal had also steeply increased. The Company is exploring ways to minimise the impact of cost. As part of this objective, the Company has started using alternate fuel.

The reduction in borrowings by Rs.310 Crores, together with the reduction of 1.13% in the average rate of interest has resulted in decrease in interest cost.

READY MIX CONCRETE DIVISION

The Division has produced 36,624 cu.m of concrete during the year, accounting for a revenue of Rs.15.55 crores (Net of duties and taxes) as against 17,604 cu.m, of concrete accounting for a revenue of Rs.7.46 crores during the previous year.

DRY MORTAR DIVISION

The Division has produced 39,290 tons of Dry Mortar during the year as against 39,851 tons produced during the previous year. The Division has sold 39,224 tons of Dry Mortar accounting for a revenue of Rs.26.33 crores (Net of duties and taxes) during the year as against 39,843 tons of Dry Mortar accounting for a revenue of Rs.25.81 crores during the previous year.

WIND FARM DIVISION

The Division has generated 2,624 lakh units as compared to 2,747 lakh units in the previous year. Out of this, 2,543 lakh units were generated from the wind farms in Tamil Nadu and 81 lakh units from the wind farms in Karnataka. Out of the units generated in Tamil Nadu, 393 lakh units were meant for adjustment against the power consumed in our plants and balance 2,150 lakh units have been sold to Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) for a value of Rs.64.38 crores. The units generated in Karnataka were fully consumed at our Mathodu Cement Plant.

The installed capacity of the wind farm of the company was 125.95 MW as on 31-03-2018 comprising of 108 Wind Electric Generators.

The income during the year from the Division was Rs.66.96 crores as against Rs.72.44 crores of the previous year.

POWER PLANTS

During the year under review, the 6 MW thermal power project at Jayanthipuram had been commissioned in December 2017. On commissioning, the aggregate capacity of the thermal power plants had gone up to 175 MW. The power generated from the thermal power plants were mostly used for self-consumption in the cement manufacturing.

NEW PROJECTS

The Company is establishing a Line III at the existing Jayanthipuram Plant with a clinkerisation capacity of 1.5 Million Tonnes Per Annum (MTPA). The cost of the project is Rs.680 crores and is expected to be commissioned in the year 2019-2020.

The Company is establishing a cement grinding unit at Haridaspur in Jajpur District in the State of Odisha with a cement grinding capacity of 0.9 MTPA. The cost of the project is Rs.515 crores and is expected to be commissioned in the year 2019-2020.

The Company is expanding its Vizag grinding unit by going in for another line with a grinding capacity of 1.1 MTPA. The cost of the project is Rs.250 crores and is expected to be commissioned in the year 2019-2020.

The Company is expanding its Kolaghat grinding unit by going in for another line with a grinding capacity of 1.1 MTPA. The cost of the project is Rs.330 crores and is expected to be commissioned in the year 2019-2020.

The clinker that would be manufactured from the Line III of Jayanthipuram would meet the requirements of the proposed grinding units.

The cement produced at the grinding units would help the Company to further expand its markets in the Coastal Districts of Andhra Pradesh and in the States of Odisha, Jharkhand and West Bengal.

The proposal to establish the grinding units near fly ash/slag availability areas and major cement consumption areas would enable the Company to economise its transportation costs and serve the markets in a better way.

The Company has also acquired a cement grinding unit from Ramco Industries Limited in March 2018. The Plant having a capacity to grind 0.2 MTPA of cement, is located in Kharagpur, West Bengal.

TURNOVER AND PROFITABILITY

The total revenue (net of duties and taxes) for the year was Rs.4,443.00 crores as against Rs.3,993.05 crores of the previous year, showing an increase of 11%. The lack of growth in the Companys core markets has contributed to lower realisation for the year, compared to the previous year.

The operating profit and profit aftertax for the year had decreased to Rs.1,136.07 crores and Rs.555.66 crores as against Rs.1,238.16 crores and Rs.649.29 crores respectively of the previous year. The lower Operating Profit and Net Profit compared to previous year was mainly due to lower realisation and increase in energy cost.

The Total Comprehensive Income for the year under review is Rs.553.94 crores as against Rs.648.05 crores of the previous year. After appropriations a sum of Rs.200 crores has been kept as retained earnings of the Company and the remaining amount has been transferred to General Reserve.

SUBSIDIARY COMPANY

The Company has a subsidiary, viz. Ramco Windfarms Limited, whose capital is Rs.1.00 crore, out of which 71.50% is held by our Company. The rest of the share capital is held by Ramco Group of Companies.

The installed capacity of the Subsidiary Company was 39.835 MW as on 31-03-2018 comprising of 127 Wind Electric Generators.

The Subsidiary Company had generated 436 lakh units of power as compared to 451 lakh units of power during the previous year.

The revenue and profit after fax for the subsidiary company for the year ended 31-03-2018 were Rs.17.45 crores and Rs.4.54 crores compared to Rs.17.81 crores and Rs.4.35 crores respectively of the previous year.

In accordance with Rule 5 of Companies (Accounts) Rules, 2014, a statement containing the salient features of the Financial Statements of the Subsidiary and Associates is attached in Form AOC-1 as Annexure -1.

CONSOLIDATED FINANCIAL STATEMENTS

The Company has 6 Associate Companies, viz. Rajapalayam Mills Limited, Ramco Industries Limited, Ramco Systems Limited, Sri Vishnu Shankar Mill Limited, Lynks Logistics Limited and Madurai Trans Carrier Limited.

As per provisions of Section 129(3) of the Companies Act, 2013 and Regulation 34 of LODR, Companies are required to prepare consolidated financial statements of its Subsidiaries and Associates to be laid before the Annual General Meeting of the Company. Accordingly, the consolidated financial statements incorporating the accounts of Subsidiary Company and Associate Companies, along with the Auditors Report thereon, forms part of this Annual Report.

As per Section 136(1) of the Companies Act, 2013 the financial statements including consolidated financial statements are available at the Companys website at the following link at http://www.ramcocemenfs.in/financial-performance.aspx

Separate audited accounts in respect of the subsidiary company are also made available at the Companys website. The Company shall provide a copy of separate audited financial statements in respect of its Subsidiary Company to any shareholder of the Company who asks for it.

The consolidated net profit aftertax of the company amounted to Rs.563.76 crores for the year ended 31st March 2018 as compared to Rs.662.74 crores of the previous year.

The Consolidated Total Comprehensive Income for the year under review is Rs.562.86 crores as against Rs.662.32 crores of the previous year.

FUTURE OUTLOOK

The Union Budget for the year 2018-2019 has focussed on uplifting of the rural economy, strengthening of the agriculture sector, healthcare for the economically less privileged, infrastructure creation and MSME Sector.

The India Meteorological Department (IMD) has forecast a normal monsoon in 2018, with rainfall likely to be 97% of the long-term average.

The country had adopted the Goods and Services Tax, a single tax to replace the existing Central and State multi taxes and levies.

All the above factors are favourable for the sustained growth of the economy, specifically construction and infrastructure.

As all our plants are fully equipped with railway siding, stand-by power back up facility and are supported with grinding units at strategic locations, our Company will be able to take full advantage of the economic momentum in the coming years.

AWARDS RECEIVED DURING THE YEAR

The Company had been awarded the prestigious Chennai Best Employer Brand Award 2017 by Employer Branding Institute - India for being exemplary in HR Practices and having used marketing communications effectively for Human Resources Development. This award is the fruit of cumulative and sustained efforts put in over a period of three decades in the arena of branding the company as an employer in its endeavour to attract and retain best talents.

The Company had won many awards in Mines Environment and Mineral Conservation, Environmental Health and Safety, Mines Safety, Quality Circles, Kaizen, 5S, etc. during the year.

The Jayanthipuram Plant had been bestowed with an Award and Letter of Appreciation for "Better Environmental Practices followed in the Cement Industry for the year 2016-17" in the State of Andhra Pradesh by Andhra Pradesh Pollution Control Board.

The Ramasamy Raja Nagar Plant had won the following awards:

* Second Best Improvement in Electrical Energy Performance for the years 2015-16 and 2016-17 from National Council for Cement and Building Materials.

* Environment, Health & Safety Excellence Award 2017 conferred by Confederation of Indian Industry for Commitment to EHS Practices.

* National Award for Excellence in Energy Management-2017 from Confederation of Indian Industry at the National Level Competition. The Plant had been awarded as an "Innovative Project" and "Excellent Energy Efficient Unit" Award Shield and Certificate of Merit.

The Alathiyur Plant had won the following awards:

* Best Environmental Excellence in Limestone Mines for the years 2015-16 and 2016-17 from National Council for Cement and Building Materials.

* Second Best Environmental Excellence in Cement Plants for the year 2016-17 from National Council for Cement and Building Materials.

* Best Improvement in Energy Performance for the year 2016-17 from National Council for Cement and Building Materials.

* Environment, Health & Safety Excellence Award 2017 conferred by Confederation of Indian Industry for the third time, for Commitment to EHS Practices.

* National Award for Excellence in Energy Management-2017 from Confederation of Indian Industry at the National Level Competition. The Plant had been bestowed with "Excellent Energy Efficient Unit" Award Shield and Certificate of Merit. This is the 14th time such an award is received by the Plant.

The Ariyalur Plant had won second Best Environmental Excellence in Limestone Mines for the year 2015-16 from National Council for Cement and Building Materials.

The Ariyalur Plant had been awarded with First Prize for Industrial Safety for the year 2013 and Second Prize for Industrial Accident Free Environment in State level for the year 2013, by Directorate of Industrial Safety and Health, Chennai.

The Chengalpattu grinding unit was awarded "Green Award - 2015" by the Honourable Chief Minister of Tamil Nadu, Thiru. Edappadi K.Palaniswami.

On behalf of the Board of Directors
For THE RAMCO CEMENTS LIMITED,
Chennai P.R. VENKETRAMA RAJA
23-05-2018 Chairman & Managing Director