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Carnation Industries Ltd.

BSE: 530609 Sector: Engineering
NSE: N.A. ISIN Code: INE081B01010
BSE LIVE 11:09 | 06 Dec 49.75 1.25
(2.58%)
OPEN

47.50

HIGH

49.75

LOW

47.50

NSE LIVE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 47.50
PREVIOUS CLOSE 48.50
VOLUME 1700
52-Week high 63.70
52-Week low 32.55
P/E 9.35
Mkt Cap.(Rs cr) 17.21
Buy Price 47.25
Buy Qty 125.00
Sell Price 49.75
Sell Qty 200.00
OPEN 47.50
CLOSE 48.50
VOLUME 1700
52-Week high 63.70
52-Week low 32.55
P/E 9.35
Mkt Cap.(Rs cr) 17.21
Buy Price 47.25
Buy Qty 125.00
Sell Price 49.75
Sell Qty 200.00

Carnation Industries Ltd. (CARNATIONINDS) - Director Report

Company director report

CARNATION INDUSTRIES LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT DIRECTORS' REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS REPORT Your Directors are pleased to present the 29th Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2012. FINANCIAL PERFORMANCE (Rs. in Lakhs) For Year Ended For Year Ended 31.3.2012 31.03.2011 Revenue from operation and other operating revenue: Export Sales (Net of Freight) 8222.18 5833.99 Domestic Sales( Net of Central 470.66 130.46 Excise and Vat) Export Incentives 473.95 411.39 Other Income 84.54 9251.33 53.82 6429.66 Profit before Finance Costs, 823.22 202.74 Depreciation & Amortisation, Extra Ordinary Item and Tax Finance Costs 510.85 310.30 Depreciation & Amortisation 178.23 155.65 Profit/(Loss) before 134.14 (263.21) extra-ordinary item and tax Extra-Ordinary Item - 11.61 Profit/(Loss) before Tax 134.14 (274.82) Provision for Tax - Current 29.44 - - Deferred 14.19 (2.03) - Tax for Earlier Year (2.93) (2.11) Profit/(Loss) after Tax 93.44 (270.68) Surplus brought forward from (75.26) 211.49 previous year Available Surplus/(Deficit) 18.18 (59.19) for Appropriation Proposed Dividend 20.74 13.83 Dividend Distribution Tax 3.36 2.24 Surplus/(Deficit) carried to Balance Sheet (5.92) (75.26) FINANCIAL REVIEW During the financial year ended 31st March, 2012 the Company achieved total revenue (net) from operations of Rs. 9251.33 lacs against Rs 6429.66 lacs in the previous year registering a growth of about 45%. The profit before depreciation, financial costs and extra ordinary item was Rs 823.22 lacs against Rs 202.74 lacs in the previous year recording an improvement in excess of 300% (3 times). The profit before tax was Rs 134.14 lacs (2010- 2011, loss of Rs 274.82 lacs) and the profit after tax was Rs 93.44 lacs (2010-2011, loss of Rs 270.68 lacs) representing significant turnaround in operation. This turnaround was mainly attributable to improved export earnings and a favourable exchange rate. FINANCE Finance costs during the year under review was higher than the previous year, based on higher trade receivables as well as higher sales achieved. The extremely slow progress in the refund of input tax credit compounded the liquidity problems further. This level of increase in working capital required additional fund and non fund based borrowing which resulted in the higher finance cost. The Management has taken appropriate steps to ensure expeditious realization of the input tax credit and the export proceeds. FOREIGN EXCHANGE EARNINGS AND OUTGO (Rs. in Lakhs) For Year Ended For Year Ended 31.03.2012 31.03.2011 Earnings - Export (F.O.B.) 8222.18 5833.99 Expenditure Travelling & Conveyance 21.59 19.83 Certification Charge - 5.82 Commission 42.67 39.21 Foreign Bank Charges 31.18 11.62 Raw Materials Other Purchase(CIF Value) 110.45 77.17 Licence Fees 5.08 - Inspection Charges 2.93 - MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENT Global Census on Foundries now show that India is the second highest producer of castings in the world with a production of approx. 8 million tons of castings per annum, second only to China which produces approx 32 million tons of castings. However the strange fact is that China produces 8 million tons of Ductile Iron which constitute 25% of their castings and India produces only 10%(of total castings) i.e. 0.8 million tons. This indicates the immense potential that India has in the future. With the massive shift of European buyers towards India - the export demand holds out strong potential. The domestic increase in automobiles, tractors and earth moving equipments is giving rise to the increased domestic demand as well. OPPORTUNITIES AND THREATS India's low share in the global market, in a situation of the possible shift of bulk of the sourcing moving to China & India, holds out strong possibility of a larger market share for India and your Company. Weak infrastructure and shortages of trained labour are the major threat to the industry and in-house training and retention of the skilled persons remains the strength of your Company. Rising prices of Electricity, Diesel and Coal continue to put pressure on costs and for which, these need to be controlled inter-alia, through a process of cost price matching. The only positive factor is that the customers are showing signs of accepting the increases. Basic raw materials prices remained steady over a range, however the Ferro Alloys and Foundry Chemicals registered an increase. SEGMENT-WISE PERFORMANCE The Management reviewed the disclosure requirement of segment wise reporting and is of the view that since the Company manufactures Castings & M.S. products which are subject to same risk and returns and hence there is one primary segment in terms of AS-17, a separate disclosure on reporting by business segments is not required. The analysis of geographical segments is based on the areas in which the Company operates. FUTURE OUTLOOK In the current fiscal year we expect to strengthen our presence in the US and in the German markets by addition of newer products and customers. We also have plans to do major business in domestic market. This should bring an additional growth in the turnover. The US Dollar and Euro are expected to remain buoyant and market volumes are expected to improve compared to the previous year. The Export incentive through DEPB was discontinued w.e.f. October, 2011 and the drawback scheme has come in place and is operating well. RISKS AND CONCERN Being predominantly in export, your Company's revenue is always subject to risks of exchange fluctuations. The Company has adopted a comprehensive risk management review system wherein it actitively hedges its foreign exchange exposures within defined parameters, through use of hedging instruments such as forward contracts. The matter of concern however remains shortage of skilled labour resulting in higher labour cost. In order to overcome this problem your Company is laying stress on in-house training and skill development, besides retention of the skilled workers. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY Your Company has an adequate system of internal control commensurate with the size and nature of its business which ensures that all transactions are recorded, authorized and correctly reported apart from safeguarding its assets against loss from wastage, unauthorized use and removal. The internal audit process strives to ensure compliance of internal control systems through submission of detailed internal audit reports periodically to the Management and the Audit Committee. The Audit Committee reviews the adequacy of internal controls based on such reports and provides guidelines for improvement of the same. Your Company's Statutory Auditors have in their report confirmed the adequacy of the internal control procedures. EXPANSION AND NEW PROJECT Your Company continues to upgrade its process and products. At the Ductile Plant the new moulding machine and the furnace are in operation now. This would enable the Company to add volumes to the sale of castings both in the domestic and export market. HUMAN RESOURCES DEVELOPMENT Your Company continued to have cordial and harmonious relations with its employees at all levels during the period under review. The operations of the Company across functions have been strengthened through induction of appropriately qualified and experienced personnel. Management of your Company strongly focuses on the performance of the managers. The Board acknowledges its thanks to all the shop floor personnel and other employees for making significant contribution to your Company. The Company has conducted several training programs for its employees to improve the working. Besides this the training programs have been conducted for improving safety and health standards of the employees. DIVIDEND Your Directors are pleased to recommend a dividend of 6% (Re. 0.60 per Equity Share of Rs.10 each) for the financial year ended March 31,2012 subject to the approval of the shareholders at the Annual General Meeting. The dividend together with the dividend tax will entail a cash outlay of Rs. 24.10 lakhs. POLLUTION CONTROL MEASURES The pollution control measures installed in the units of the Company are in full operation as required under the statutes. The Company has taken immediate steps to rectify the Pollution Control devices wherever minor variations were noticed by the Management during the year under review. DIRECTORS In terms of section 256 of the Companies Act, 1956, Mr. B. K. Datta retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment. STATUTORY AUDITORS M/s Jain & Bagaria, Chartered Accountants, Statutory Auditors of the Company will retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as statutory auditors for the financial year 2012-13. The Company has received a letter dated 29th May, 2012 from them to the effect that their re-appointment, if made, would be within the limit prescribed under section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for such re- appointment within the meaning of section 226 of the Companies Act, 1956. COST AUDITOR Mr. Deep Narayan Bandyopadhyay, Cost Accountant, was re-appointed as Cost Auditor for the financial year 2012-13 to conduct cost audit of the accounts maintained by the Company, in respect of the various products prescribed under Cost Audit Rules, 2011. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND RESEARCH AND DEVELOPMENT The particulars in respect of energy conservation as per Companies (Disclosure of Particulars) Rules, 1988 is not required to be provided by your Company as it is not the industry included in the Schedule to the Rules. The Company has however taken measures for conservation of energy. The Company has installed a Divided Blast Cupola in the unit at Liluah which has significantly reduced the coke consumption. Further a new Cupola has been installed at the Uluberia unit of the Company which will significantly reduce the energy consumption by the above unit. The production was carried using the previous technology. The company has a quality cell which ensures the quality of the product before being sent to the customers. PARTICULARS OF EMPLOYEES The information required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended from time to time is not applicable as none of the employees are drawing salary more than the limit prescribed under the aforesaid Rule. PUBLIC DEPOSITS The Company has not taken any Public Deposits during the year. STOCK EXCHANGE The Equity Shares of the Company are listed with The Calcutta Stock Exchange Limited and Bombay Stock Exchange Limited. CORPORATE GOVERNANCE Your Company attaches considerable significance to good Corporate Governance. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a compliance report on Corporate Governance and Management Discussion and Analysis Report form part of the Annual Report alongwith the Auditors Certificate on its compliance. DIRECTORS RESPONSIBILITY STATEMENT Your Directors confirm that in preparation of the Annual Accounts the applicable accounting standards have been followed along with proper explanation relating to material departures. The Directors have selected such accounting policies and applies them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31.03.2012 and of the Profit and Loss of the Company for that period. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. The Directors have prepared the accounts on a going concern basis. ACKNOWLEDGEMENT Your Directors wish to place on record their appreciation and thanks to the Banks, Financial Institutions, various Government Authorities for their valuable assistance and co-operation and for the trust and confidence reposed in the Company by the Customers and Shareholders. Your Directors also thank the Executives, Staff and Workforce of the Company for their efficient and dedicated services. On Behalf of the Board of Director R.P. Sehgal (Managing Director) Place: Kolkata Arun Kumar Bose Date : 29th May, 2012 (Whole time Director)

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