The year 2015-16 has been a year of growth for CUMI despite the volatile global economyand challenging Indian market conditions. The global economy remained subdued with growthin emerging and developing economies constituting about 70% of the global growthcontinued to decline and the advanced economies witnessed only a very modest recovery. InNorth America despite a setback in the first quarter of 2015 the underlying drivers fora gradual acceleration in the economic activity remained intact. The eurozone economyremained sluggish and revival contin- ues to be slow. The volatility and uncertainty inthe Russian economy continues to adversely impact its currency. The economic outlook forthe year 2016 globally is forecasted to see a marginal improvement from the 2015 levels.Notwith- standing the depressing global economy India's economic growth continued duringthe year well supported by the Government's initiatives and reorientation programmes.
CUMI its subsidiaries and joint venture companies had a significant year 2015-16. Thestandalone revenue of the Company recorded 11 per cent growth driven by enhancedperformances in the Abrasives and Electrominerals busi- nesses. The consolidated revenuefrom operations grew marginally by 1.9 per cent largely owing to currency transla- tionlosses caused by the depreciation of the Russian Rouble as well as the winding down ofoperations in Thukela Refrac- tories Isthibe South Africa. However during the yeardespite a marginal growth in revenues the Company was able to record an impressive 48 percent growth in its operating profits at a consolidated level signifying its resolute focuson delivering operational efficiencies. The Total Productive Maintenance practices nowwell imbibed within the CUMI plants and prudent cost management efforts aided in con-taining the manufacturing costs and optimising efficiency.
During the year the Company continued its Research and Development initiatives whichincluded several joint projects between the various business divisions in addition toengaging with third party expertise in specific fields. Aligned with its core belief thatcustomers and business partners play a very crucial role in its growth the customer anddealer engagement initiatives at CUMI progressed well.
In continuance of its unbroken dividend track record a dividend of Rs. 1.50 per sharewas paid during the year which is higher than the dividend paid in the previous year. As amatter of prudence the Board has recommended that the dividend paid during the year betreated as the final dividend by the shareholders.
Abrasives CUMI's largest operating business recorded a good growth during the year inthe backdrop of an improving domestic demand and aggressive expansion of the dealernetwork. The indigenous sourcing of input materials resulted in increased profitability.The operating margins improved owing to better efficiency across the value chain andstrong distributor and customer partner- ships. The business model in China was reviewedand it was decided to close manufacturing operations. A new toll manufacturing model hasbeen set up in its place that will continue to deliver CUMI-quality products to ourstandards to address both the Chinese and International markets. The sale of the plant& machinery is in progress.
CUMI's subsidiary Sterling Abrasives which manufactures specialist conventionalAbrasives and its joint venture Wendt India which addresses the Super Abrasives andGrinding machines market had marginal growth in their revenues. However the profitabilityof these companies came under pressure owing to various factors including higherdepreciation arising from capacity expansion change in product mix etc.
Inspite of having a difficult previous year the Electro- minerals business of CUMImade a quick turnaround and recorded an impressive growth both in terms of revenue as wellas profitability. The demand for Abrasive grains increased substantially resulting in theincreased volumes and the business was able to establish its special prod- ucts in themarket. The business in Russia continued to be good despite the currency depreciation withVolzhsky Abrasive Works launching various grits with new fractions as per industryrequirements. In South Africa regardless of the drop in volumes the profitability ofFoskor Zirconia improved with the depreciating Rand. The relocation of theElectrominerals Refractories and Bubble Zirconia plants in South Africa to India isunderway and we believe that with greater levels of skill and technical attention theplant operations can improve significantly. CUMI Europe set up last year to serve theEuropean markets better with greater customer connect is in the process of establishingits business presence.
The Ceramics businesses had a very tough year. While on a standalone basis there was amarginal improvement at a consolidated level the revenues declined. The IndustrialCeramics did well with an increase in Metallized and Engi- neering Ceramics businesses.However the Wear Ceramics business which is predominantly projects dependent con- tinuedto struggle in view of project deferrals in certain sectors. The Lined Equipment businessat CUMI Australia continued to be good. Strategic initiatives have been undertaken to turnaround the business in the Americas.
The marginal growth in Industrial Ceramics was off-set by lower sales in Refractoriesbusiness including that of the joint venture Murugappa Morgan Thermal Ceramics. Thedecline in customer demand owing to projects deferment resulted in Refractories businesscontinuing to have yet another difficult year. During the year the legal process ofamalgamation of Cellaris Refractories India a company set up to manufacture ultra lightweight Alumina Bubble Refractories for offering heat resistant products to cus- tomers ofniche markets was completed and the benefits are expected to accrue shortly.
Despite being a difficult year on the operations front the year 2016 was a year ofrecognition for the Industrial Ceramics division. It was recognized as one of the top 25innovating companies in the Country by the Confederation of Indian Industry for itssuccessful completion of the de- bottlenecking project in Metallized Cylinders business.The division continued to focus on Research and Development to leverage technology inproviding value added products to its customers. The year 2015-16 was also a significantyear with the Super Refractories division completing 50 years and the Industrial Ceramicsdivision completing 25 years of operations.
The capital expenditure during the year increased substan- tially in view of the plantrelocation projects which are under way as well as continued focus on improvement inquality new products innovation and automation at all manufac- turing facilities.Capability development through structured training programmes progressed well during theyear.
Being socially responsible in addition to addressing the training and developmentneeds of its employees the Company through its dedicated Centre for skill develop- ment -CuMI Centre for Skill Development (CCSD) caters to the needs of the society too. TheCentre provides vocational training including behavioral and communica- tion skills toyouth from rural and underprivileged societies. During the year the Company successfullyreplicated the CCSD model of Hosur in Edapally Cochin thus expanding its reach in thisarea.
Safety at the work place continues to be a top priority and periodic awareness sessionsand workshops continue to be conducted for identification and elimination of unsafeworking conditions.
The Company's debt equity ratio continues to be healthy owing to prudent workingcapital management. This is asserted by the fact that the capital expenditure pro-gramme^) during the year were largely financed through internal accruals. A robust riskmanagement framework aids in timely identification evaluation and mitigation of risks onan ongoing basis. The adequacy of the internal control mechanisms are being continuouslyevaluated for ensuring effectiveness. The regulatory environment in the last few years hasbeen very dynamic and the teams have been agile in quickly adapting to the changingscenario and delivering results.
The teams at CUMI its subsidiaries and joint ventures ably led by K SrinivasanManaging Director and his colleagues across units and geographies have risen up to thechallenges with both conviction and commitment. My sincere thanks to all colleagues whohave been instrumental in ensuring that the Company is back on the growth path withenhanced profitability. The involvement of the esteemed members of the Boards in guidingand supporting the teams is indeed most commendable. The Board deliberations have alwaysbeen a good mix of encouragement challenge and caution while ensuring sound governanceand strict adherence to our core values and beliefs. Iam thankful to the Board members fortheir time and wise counsel.
To all our stakeholders customers suppliers vendors bankers and of course to all ofyou shareholders our most grateful thanks for your unstinted support to the Company in itsjourney towards "Making Materials Matter".
M M Murugappan