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Balmer Lawrie & Company Ltd.

BSE: 523319 Sector: Others
NSE: BALMLAWRIE ISIN Code: INE164A01016
BSE LIVE 15:56 | 02 Dec 974.85 -23.80
(-2.38%)
OPEN

997.65

HIGH

1000.00

LOW

949.95

NSE LIVE 15:59 | 02 Dec 973.85 -23.75
(-2.38%)
OPEN

1003.65

HIGH

1004.50

LOW

950.00

OPEN 997.65
PREVIOUS CLOSE 998.65
VOLUME 21493
52-Week high 1014.40
52-Week low 491.00
P/E 16.92
Mkt Cap.(Rs cr) 2778.32
Buy Price 974.85
Buy Qty 4.00
Sell Price 0.00
Sell Qty 0.00
OPEN 997.65
CLOSE 998.65
VOLUME 21493
52-Week high 1014.40
52-Week low 491.00
P/E 16.92
Mkt Cap.(Rs cr) 2778.32
Buy Price 974.85
Buy Qty 4.00
Sell Price 0.00
Sell Qty 0.00

Balmer Lawrie & Company Ltd. (BALMLAWRIE) - Chairman Speech

Company chairman speech

CHAIRMAN’S ADDRESS

Dear Esteemed Members

It is my pleasure to welcome all of you to the 99th Annual General Meetingof your Company. The year 2016 is a landmark year for your Company as it has stepped intoits 150th year of Foundation. We are extremely fortunate to witness this uniquemilestone of your Company which is a testimony of the vision entrepreneurship spirit andcommitment of our Founders and Leaders. It is a matter of great pride that today yourCompany has a unique place in the corporate history of the nation. We cherish our journeyand our rich heritage and we plan to celebrate the completion of your Company's 150 yearsin a grand manner. This very special anniversary is also an opportunity to walk downmemory lane to introspect and plan the way forward.

Your Company has gone through number of transformations since its inception. It wasformed as a partnership firm on 1st February 1867 by its Founders Mr. StephenGeorge Balmer and Mr. Alexander Lawrie. In the initial years your Company operated as an'agency house' and the agency business was mainly in trading. The basic character of thebusiness i.e. 'commission agency' remained unaltered for many years. Your Company became aPvt. Ltd. company in 1924 a Public Ltd. company in 1936 and then a Government of IndiaEnterprise in 1972 evolving into a diversified conglomerate with strong leadership inboth manufacturing and service businesses. We have crossed many major milestones in ourjourney and our success today is due to the fact that the right course was set years oreven decades ago. I feel proud to say that your Company has never made losses in itsjourney of 149 years.

Before I interact with our distinguished Members I express my gratitude to all of youfor your continued trust support and patronage that you have put in this Company sincethe last 149 years. It is my privilege to present to you the Annual Report of the Companyfor the Financial year 2015-16. May I take this opportunity to brief the stakeholdersabout your Company's performance during 2015-16 and the environs it had been working in!

The unusual and prolonged volatility in the global economy has dampened investors'sentiment and global recovery is not yet in sight. The uncertainties and challenges seemto be many with risks of extreme events rising. Amidst this gloomy landscape India'smacro-economy is stable founded on the government's commitment to fiscal consolidationand low inflation. Its economic growth is amongst the highest in the world aided by areorientation of government spending towards required public infrastructure. Inflationthe fiscal deficit and the current account deficit have all declined. Economic growthappears to be recovering albeit at varying speeds across sectors.

Agriculture is expected to register better growth this year owing to favorable monsoon.Industrial growth has shown significant improvement primarily on account of the remarkableacceleration in manufacturing (9.5% vis-a-vis 5.5% in 2014-15). The service sector remainsthe key driver of India's economic growth contributing almost 66.1% of its gross valueadded growth in 201516 important net foreign exchange earner and the most attractivesector for foreign direct investment inflows. However the global slowdown has cast a

shadow even on this promising sector.

Growth in 2016-17 may not pick up dramatically from the levels achieved in 2015-16 asthe possibility of slow global economic growth and financial sector uncertainties stillloom large. The Indian economy is expected to register growth in excess of 7% for thethird year in succession.

Hence I can conclude that despite the many challenges there remains considerableroom for optimism. Reflecting the better economic performance and the commitment of thegovernment to reforms the global perception about India's competitiveness has improved asper the Global Competitiveness Index of the World Economic Forum. Significantly atposition 55 India went up 16 rungs up the ladder in 2015-16 which is the largest gainamong the major economies.

Against the aforesaid macro-economic backdrop it has been seen that the corecompetency of the Company lies in its ability to handle multiple diversified businesses ina manner to keep topline and bottomline healthy despite adverse fluctuations in businesssegments.

I would now like to discuss the performance of the various Strategic Business Units(SBUs).

INDUSTRIAL PACKAGING [SBU:IP]

SBU:IP is the largest manufacturer of Steel Barrels in India and is a trend setter inthe industry in terms of quality and technology. Steel Barrels are utilized for safepackaging and transportation of liquid semiliquid pulp greases powder etc. The SBU hasbeen catering to the Steel Barrel requirements of neighbouring countries as well.

The main drivers of rigid industrial packaging are

underlying growth of customer industries shift between different materials due tochanging customer needs and standardization of products increasing comparability betweenpackaging products.

The SBU is making entry to new market segments such as PCPIR and also into marketswhere it does not have substantial presence. Sales volume of the SBU during the year2015-16 was marginally less than the previous year which was accomplished despite theshrinkage of available markets in the wake of directives to Government companies toprocure MS Drums only from Small & Medium Enterprises. The new state-of-the-art barrelmanufacturing plant at Navi Mumbai has stabilized and since the plant is located close tothe largest consumption centre for Steel Barrels in the Western Region it has acompetitive advantage. The closure of the IP Sewree plant was completed in a congenialenvironment.

GREASES & LUBRICANTS [SBU:G&L]

The business of SBU:G&L may be divided into:

a) Processing / Contract / Manufacturing

b) Direct Sales or what the SBU refers to "Balmerol" sales segment which inturn may be further classified into -

i) Institutional / Industrial Sales - basically sales to Railways Defence Steel CoalSector OEM Sponge Iron Power & Infrastructure

ii) Retail Sales

iii) Export

In 2015-16 due to the challenging business

environment and volatility in the lubricants market and also falling base oil pricesthe SBU recorded a 7.94% negative growth in turnover over the previous year. This wasregistered despite various constraints holding up growth of the manufacturing sector.

The bottomline of the SBU during the year has seen a significant turnaround over thelast year mainly due to the favourable impact of lower base oil prices.

The SBU is laying thrust on the retail sector and has also been working onimplementation of DMS (Distributor Management System) primarily for retail functions totrack the secondary sales and to increase operational efficiency.

The SBU's R&D Centre known as the Application Research Laboratory (ARL) located inKolkata developed tribological solutions using the unique "DEKATROL technology"which has a ten-point advantage is eco-friendly helps to reduce frictional energylosses enhance fuel economy and also the life of the product. The solutions developedusing "WOWtech" technology provide extra protection and act as a strong shieldfor the engine clutch and gear for 2 wheeler applications.

The SBU has implemented ISO/TS 16949:2009 at its Silvassa facility to bring ininternational practices in Quality Management System towards design and manufacture oflubricants. The SBU has implemented SAP effective 1st July 2015.

LEATHER CHEMICALS [SBU: LC]

The Government of India had identified the Leather Sector as a Focus Sector in theIndian Foreign Trade Policy in view of its immense potential for export growth prospectsand employment generation. The Indian leather industry aims to augment production thereby

enhance export and resultantly create additional employment opportunities.

Being the major market share holder in the Synthetic Fat Liquors (SFL) segment the SBUhas good opportunities to grow. There is potential available for the Syntan market wherethe SBU can penetrate further. The newly introduced Beam House Chemical Balgresol SOC waswell appreciated by our customers. New dealers have been appointed to improve thedistribution system across the country. However the threat of shrinking market alwayslurks on this industry.

Inspite of lower sales volume achieved during 201516 as compared to the previous yearthe SBU turned around to earn profits by improving process efficiency and undertakingoperational excellence initiatives.

SBU: LOGISTICS

Under this SBU there are two verticals viz. Logistics Infrastructure and LogisticsServices.

A. LOGISTICS INFRASTRUCTURE

The Logistics Infrastructure business comprises three main segments viz. ContainerFreight Stations (CFS) typically set up in the vicinity of Ports Warehousing &Distribution (W&D) and Temperature Controlled Warehouses (Cold Chains).

Presently the Company has three state-of-the- art CFSs located at Nhava Sheva (NaviMumbai) Chennai and Kolkata. Incidentally these three ports account for nearly 54% ofthe total container traffic handled in Indian Ports and this has gone down by 1.9% ascompared to last year. The drop was mainly attributable to the frequent congestion at JNPTand better infrastructure facility and increase in vessel frequency at non-major portssuch as Mundra Pipavav and Krishnapatnam.

The import volume in the three ports of JNPT Kolkata and Chennai improved by 0.5% andthe volumes moved to CFS from Port in these three cities rose sharply by 7% during 2015-16as compared to the earlier year.

Warehousing & Distribution facilities are presently available at Kolkata andCoimbatore. The Indian Warehousing industry of late has transformed itself into an activeone by providing additional Value Added Services (VAS).

Emergence of new storage models such as MMLP (Multi Modal Logistics Park) is an evolvedform of modern warehousing offering various Value Added Services apart from traditionalstorage functions. These services would improve quality of warehousing and storage spacein the country although land acquisition issues high capital investment low technologypenetration lack of supporting infrastructure and fragmented market are collectivelyimpeding the growth of this business segment. Balmer Lawrie is setting up its MMLH projectat Vizag in collaboration with the Joint Venture partner M/s Visakhapatnam Port Trust(VPT). Based on the MOU signed with VPT land of approximate 53 acres was allotted to theJV between VPT and BL for putting up a Multi Modal Logistics Hub. In this Multi-ModalLogistics Hub facilities will be created for handling Exim and Domestic Cargo.

The Logistics Infrastructure and Logistics Services verticals continue to drive thebottomline of the Company. During the year the CFS business grew in volumes revenues andearnings as compared to the previous year primarily due to your Company adding businessfrom new customers even while retaining its present set of customers.

Warehousing activity performed exceedingly well during the year due to betterutilization of space.

The CFS business depends on the Exim trade of the country. Any fluctuation in tradedirectly impacts the container traffic volumes. Further there is a growing trend amongstlarge and well established importers to avail the green channel facility whereby directdelivery is taken of import laden boxes from the Port bypassing the CFSs as it is morecost effective. These are being addressed through appropriate management interventionemployee involvement and improved processes.

B. LOGISTICS SERVICES [LS]

The industry is becoming more competitive with the entry of global giants and largeIndian corporate houses. A plethora of companies are also planning to broaden their areaof operations and are also planning to develop their own logistics parks across thecountry. Air freight services continue to be a dominant activity of LS and provides morethan 50% of the SBU's overall topline.

The dismantling of Transchart has opened the floodgate of opportunities in oceanfreight activity which the SBU is keen on capitalising. Improvement in service levels iscontinuously ushered in through CRM and better utilisation of technology.

During the year LS achieved a growth of 8% in topline which is primarily on account ofsurge (20% growth YOY) in air freight services activity partly offset by dip in oceanfreight earnings due to volatility in the Global Ocean Freight market. There were multiplemerger & acquisitions in Shipping Lines for optimum use of their services because ofglobal slowdown. Your Company also suffered like many in the industry due to reductionin profit margins.

Your Company during the year worked on upgrading technology for its LS operation. Itsoperation software is undergoing major revamp and the benefits are likely to accrue in thecoming years.

The SBU during 2015 -16 achieved the highest ever topline since its inceptionregistering a growth of 8% year on year.

TRAVEL & VACATIONS [SBU:T&V]

SBU: T&V is one of the largest tours & travel operators in the country whichprovides end to end domestic and international travel ticketing tourism and MICE relatedservices to its clients. It is one of the oldest IATA accredited travel agencies in India.Operating from more than 88 locations across 19 cities in the country Balmer Lawrie worksround the clock to provide reliable innovative and cost effective travel solutions to itscustomers. Apart from the Central Government Ministries and Public SectorUndertakings/Enterprises the SBU has started servicing private customers as well.

Travel business in general is passing through difficult times. Government officialshave reduced their air travel as part of austerity measures. Corporate travel is notincreasing with the advent of video conferencing meeting through skype etc.

The acquisition of brand Vacations Exotica has opened up new avenues for the SBU. Knownfor its innovative products the SBU now has an access to various other streams of revenuelike Hotels Transportation Holiday Packages and Forex.

The ticketing vertical continues to be topline driver for your Company. The successfulimplementation of the SBT (Self Booking Tools) in some PSUs present an opportunity to theSBU to venture out and add Private sector corporates to its list of clientele.Possibilities of some major customers of your Company buying tickets through internet isnot ruled out.

During the year the topline almost remained flat. This is because of the average farescoming down sharply in 2015-16 compared to 2014-15 due to reduction in aviation fuelprices. However the number of tickets booked went up significantly for the SBU. TheSBU’s financial performance was also noteworthy as it improved compared to theprevious year.

Keeping in view of the changing trends in the travel industry the SBU has embarked ona major plan to upgrade its technology which will help to improve its service levels andreduce overheads.

REFINERY AND OIL FIELD SERVICES [SBU: ROFS]

SBU: ROFS is engaged in the activity of Mechanized Sludge/Sediment Cleaning andHydrocarbon Recovery Services of the crude oil storage tanks. This continues to be a nicheindustry with a very limited number of players and your Company is a pioneer and leader inthis market.

The SBU continues to enjoy a sizeable market share in the processing of oily sludge.Additional growth opportunity exists with the applicability of strict pollution norms inthe Oil and other related industry.

In 2015-16 the SBU has achieved growth above the last year's turnover and alsosubstantial increase in segmental profit. This is owing to robust market demand forservices along with improvement in operational efficiency and effective cost control bythe SBU.

OVERALL FINANCIAL PERFORMANCE

Your Company recorded a turnover of Rs.289495 Lakhs in 2015-16 representing a marginalreduction of 1.67% over 2014-15. However the Profit Before Tax (PBT) marked a significantincrease to Rs.23454 Lakhs from Rs.21044 Lakhs in the preceding year. SBUs: IndustrialPackaging Greases & Lubricants and Refinery and Oil Field Services are the mainincremental profit generators of your Company.

The Board of Directors has recommended a dividend at the rate of Rs.20 per Equity sharewhich corresponds to 200% for the financial year 2015-16 for declaration by the members inthe 99th Annual General Meeting.

THE FIRST QUARTER: 2016-17

The Unaudited Financial Results for the First Quarter ended 30th June 2016were approved by the Board at its meeting held on 10th August 2016. YourCompany registered a decrease in gross and net turnover by 2% each over the correspondingquarter in the preceding financial year. However Profit Before Tax (PBT) and Profit AfterTax (PAT) have increased substantially in comparison to the corresponding period of thepreceding financial year. The increase is primarily due to favorable base oil and steelprices and several operational efficiency improvement initiatives taken by your Company.The collection from Debtors remains a major cause of concern and this is primarily due tochange in market practice. The inventory factor days have shown significant improvement.However your Company is quite optimistic about registering a positive growth in theupcoming three Quarters.

CORPORATE GOVERNANCE

Your Company's culture policies relationship with stakeholders and loyalty to valuesis reflected in the Corporate Governance Report. Following are the five

pillars of Governance that your Company conforms to as a part of its commitment toadopt global best practices -

• High accountability to its stakeholders;

• Absolute transparency in its reporting system and adherence to disclosurecompliance;

• High ethical standards in the conduct of business with due compliance of lawsand regulations;

• Enhancement in the stakeholders' value on consistent basis; and

• Contributing to the enrichment of quality of life of the community throughdischarge of Corporate Social Responsibility and promotion of Sustainable Development.

With the advent of Companies Act 2013 and the related Rules followed by ListingRegulations there has been a material change in the area of statutory compliances. YourCompany is making best efforts to adapt and comply with the changing statutes. During theyear number of policies were adopted as per the requirement of the statute and tostandardize the various activities and procedure of the organization.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company believes in giving back to the Society. Our motto is sustainable growth.As a responsible corporate citizen we undertake several CSR activities for the benefit ofthe society.

Balmer Lawrie's CSR initiatives are driven by two Flagship Programs - Balmer LawrieInitiative for Self-Sustenance [BLISS] and Samaj Mein Balmer Lawrie [SAMBAL]. While thefirst Program is directed at providing and improving the long term economic

sustenance of the underprivileged the second Program aims at improving the livingstandards and quality of life of the population in and around your Company's work-centers.During the year 2015-16 your Company spent Rs.394 Lakhs towards various CSR activities.

ACKNOWLEDGEMENT

I take this opportunity to thank all of you for your support and continued confidencein us which have been our source of inspiration. On behalf of the Board of Directors Iwould like to convey to you our sincere gratitude.

I acknowledge the continued support and guidance of our Administrative Ministry theMinistry of Petroleum & Natural Gas Government of India for the guidance andencouragement provided to your Company. I also wish to thank other Ministries of theGovernment of India and other Governmental authorities for their cooperation.

I would like to thank our holding company Balmer Lawrie Investments Ltd. its valuedshareholders our valued customers vendors business associates bankers financialinstitutions and other stakeholders for their continued support and co-operation.

Our performance during the year was driven by the dedication and commitment of ouremployees. Our employees are our biggest strength. I would like to record my appreciationfor the efforts of all my colleagues at Balmer Lawrie for their dedication and hard work.

It was a combination of many factors which made Balmer Lawrie a successful enterprise.Our success story has been possible only because of a high- performing and motivatedleadership team and the

commitment of each individual employee. We want to continue our growth journey andtouch the zeniths of success in all our endeavours. Finally I must convey my gratitude tomy colleagues on the Board for their wise counsel and valued involvement.

I wish all of us have a great 150th anniversary year. We are grateful foryour presence today. Thank you once again for the trust and confidence reposed on BalmerLawrie.

Prabal Basu

Chairman & Managing Director

10th August 2016 Kolkata

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