Across geographies divisions and functions teams exude vibrant energy and demonstratea deep sincerity of purpose and commitment to be ahead of the curve in all facets ofoperations.
The year 2016-17 was a good year for CUMI amidst a struggling global economy whichcontinues to face downside risks in terms of increased protectionism heightened policyuncertainty and weaker potential growth. Global industrial growth is forecasted tostrengthen in 2017 with a pickup in manufacturing and trade favourable global financingconditions and stabilising commodity prices. The Indian economy despite the sharpslowdown at the end of year owing to an unfavourable base effect and the demonetizationcontinues to be amongst the fastest growing economies in the world. The Goods and Servicestax (GST) a significant reform in the indirect tax structure of the country to usher in aharmonised national market for goods and services is expected to have a favourable impacton the economy inspite of the implementation challenges.
CUMI's consolidated revenue increased during the year by nine per cent owing to betterperformance across all divisions and also well supported by performances of itssubsidiaries and joint ventures. The major strategic initiative in terms of relocation ofplants from South Africa and China and their subsequent recommissioning in different partsof India were successfully completed during the year the benefits of which are likely toaccrue in the coming years. Relentless cost management efforts and efficiency drive aidedin improving overall profitability. The continuous focus on implementation of the TotalProductive Maintenance (TPM) practices across all our plants have improved the efficiencyof the entire production process. During the year CUMI's oldest plant at TiruvottiyurIndia was awarded the JIPM excellence award in TPM and the Industrial Ceramics Plant atHosur India has successfully completed the
CII TPM health check and is now geared up for the JIPM excellence assessment this year.Capital expenditure programmes were well executed as per plan and prudent working capitalmanagement has aided the Company becoming debt free during the year. At a consolidatedlevel the net debt position is very marginal which signifies the strength of its overallcash flow position.
In the backdrop of positive macro-economic factors in India like infrastructuredevelopment energy related reforms coupled with conscious efforts like introduction ofnew products contributed to the better performance strengthening of its dealer &distribution network etc. Abrasives CUMI's largest operating business recorded a 10 percent growth during the year. The indigenous sourcing of input materials continue to givethis business segment a competitive edge in the market. Better efficiency across the valuechain through TPM practices and strong partnership with distributors as well as customershave aided in improving margins. The up gradation of the bond production facility as wellas launch of new products bettered the performance of the Russian subsidiary VolzskhyAbrasive Works. The Indian subsidiary Sterling Abrasives which manufactures specialistconventional Abrasives has performed well. Wendt India the joint venture company whichaddresses the Super Abrasives Grinding machines & Precision components had a goodgrowth in both revenue and profitability. The discontinuance of in-house manufacturingoperations in China have minimised losses and a new business model for its futureoperations has been well established.
The Ceramics business which had a tough previous year has done very well this year.Both at the standalone and consolidated levels there has been a significant improvementin revenues as well as profitability. The year 2016-17 was also momentous for the divisionin that it has completed 25 years. The Metalized cylinder Engineered Ceramics and WearCeramics segments continue to do very well. The repositioning of the equipment purchasedfrom NTK Japan has been completed at Hosur India this year and is expected to commencecommercial production soon. The Lined Equipment business at CUMI Australia continued to begood thus improving the consolidated performance. The strategic initiatives undertaken inthe previous years to turn around the business in the United States has started to yieldresults with a good growth in revenues. The Refractory business growth over the last yearhas also been good driven by growth in Fired Refractories and Anti-Corrosive segments.Efforts have been taken in the last two years in establishing niche applications for thissegment which will drive the future growth. The Company's joint venture Murugappa MorganThermal Ceramics engaged in manufacture of Ceramic Fibre products also did well tomaintain its revenues and profitability.
The Electrominerals business of CUMI which did exceptionally well last year grewmarginally this year by three per cent. The decline in Solar Photovoltaic business as wellas the weak markets in China and Europe adversely impacted business performance. Theincrease in input cost as well as lower rainfall in Maniyar India which houses the hydelpower plant for meeting the power requirement of this division has affected the powergeneration resulting in increased power cost with an overall impact on its profitability.The business is in the final stages of obtaining requisite approvals for establishing anadditional power plant at Keerithodu India to meet its power requirements. The flat salesof Fused Zirconia in South Africa as well as the power shortage in Russia due tomaintenance issues for more than two months impacted the production volumes and ultimatelythe consolidated sales. The Rouble volatility and resultant adverse movement in exchangecontinued to impact the profitability of the Russian operations at a consolidated level.Recently CUMI also set up three fusion plants at Cochin India - a Zirconia Bubble Fusionplant and two Alumina Fusion plants thus creating one of the most advanced and integratedelectro-mineral complexes worldwide. This initiative is expected to add at full capacity25000 tonnes of fused minerals which will improve the future performance of thisbusiness.
Southern Energy Development Corporation Limited the gas based power generationsubsidiary recorded its highest ever revenue since its inception this year and itsprofitability grew by about 168%. Net Access the IT arm of the Group grew by 33% in salesand about 45% in profits after tax.
The Board has prudently considered an enhanced dividend of ' 1.75 per share for theyear of which Rs.1.00 per share has already been paid as interim dividend during the year.
The year 2016-17 was a year of many recognitions for CUMI. It is with great pride weshare that CUMI is the recipient of the prestigious Golden Peacock awards in twocategories - Corporate Ethics and Corporate Social Responsibility (CSR). TheElectrominerals division was also conferred the national award for excellence in CSR bythe National CSR Leadership Foundation. Both the Industrial Ceramics division as well asthe Electrominerals division have won the Confederation of Indian Industries (CII)Industrial Innovation awards and have been placed in the list of Top 25 innovativeorganisations.
In the area of material sciences CUMI pursued its research and development initiativesvigorously during the year including the setting up of a Centre of Excellence certified bythe DSIR for research in technical ceramics for industrial and advanced applications atHosur India. With this CUMI has six research centres recognized by the Department ofScientific and Industrial Research Government of India. These recognitions andinitiatives reinforce our commitment to remain socially responsible as well as relevant inall our endeavors. The CUMI Centre for Skill development (CCSD) the CSR initiative ofCUMI in addressing the training and development requirements of rural and underprivilegedyouth and honing their skills for future employment in any industry progressed well. Thesafety record across all locations has been excellent. Safety training programmescapability development programmes employment engagement initiatives continued during theyear with enhanced vigor.
It has been yet another good year from the compliance perspective and the team has doneextremely well in adapting to the changing environment. CUMI its subsidiaries and jointventures in India have seamlessly migrated to the new Indian Accounting Standards and aregearing up for further changes in the future.
To remain relevant and purposeful has been the inherent strength of the CUMI teamacross the world. Under the able leadership of Mr. K Srinivasan Managing Director who iswell supported by the leadership across geographies divisions and functions teams exudevibrant energy and demonstrate a deep sincerity of purpose and commitment to be ahead ofthe curve in all facets of operations. I am thankful to the esteemed members of our Boardwho have been a great source of strength and support to the Company its leadership and tome personally through their involvement guidance and wise counsel. Mr MLakshminarayanan and Mr Shoban Thakore will retire from the Board in July 2017. We wishthem well. We welcome Mr. P S Raghavan and Mr. Sujjain S Talwar to the Board. Mr. Raghavanwho has retired from the Indian Foreign Service has a wide global experience in externalaffairs. Mr. Talwar a qualified solicitor has vast corporate legal experience. Theirinduction into the Board gives it a balanced composition with varied experience andexpertise.
Our most sincere thanks to all our stakeholders customers suppliers vendors bankersand ofcourse to all of you shareholders for your unstinted support to the Company in itscontinuous effort towards "Making Materials Matter".
M M Murugappan