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Kirloskar Ferrous Industries Ltd.

BSE: 500245 Sector: Metals & Mining
NSE: KIRLOSFERR ISIN Code: INE884B01025
BSE LIVE 12:05 | 20 Nov 82.00 1.25
(1.55%)
OPEN

82.00

HIGH

82.90

LOW

81.45

NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 82.00
PREVIOUS CLOSE 80.75
VOLUME 90001
52-Week high 112.00
52-Week low 64.70
P/E 26.54
Mkt Cap.(Rs cr) 1,126
Buy Price 82.00
Buy Qty 704.00
Sell Price 82.25
Sell Qty 202.00
OPEN 82.00
CLOSE 80.75
VOLUME 90001
52-Week high 112.00
52-Week low 64.70
P/E 26.54
Mkt Cap.(Rs cr) 1,126
Buy Price 82.00
Buy Qty 704.00
Sell Price 82.25
Sell Qty 202.00

Kirloskar Ferrous Industries Ltd. (KIRLOSFERR) - Chairman Speech

Company chairman speech

KIRLOSKAR FERROUS INDUSTRIES LIMITED ANNUAL REPORT 2004-2005 CHAIRMAN'S REPORT 14th Annual General Meeting of Kirloskar Ferrous Industries Limited on August 5, 2005. Welcome Good morning Ladies and Gentlemen On behalf of the Board of Directors, I extend a very warm welcome to all of you to this 14th Annual General Meeting of your Company. The notice, convening the meeting, the Directors' Report and the audited accounts have been with you for some time and with your permission, I shall take them as read. Economic Environment: In the year under review, the Country's GDP recorded a healthy growth of 6.9%. While the growth in the agricultural sector was only 1.1%, the growth in industrial sector was 7.3% with services topping the growth chart at 8%. The manufacturing sector recorded an impressive growth of 8.9%. With increase in crude oil prices, inflationary pressures during the year firmed up and annual rate of inflation was 6.4% as compared to 5.4% in 2003-04. On the external front, the country's exports went up by 19% while the imports clocked a higher growth of 23%. The foreign exchange reserves of the country stood at USD 141.2 billion as at the end of March 2005. Thus India's forex reserve was fifth largest in the world. Industry Overview: The two major constituents of pig iron and casting industries are coke and iron ore. In the first half of the year under review, the price of coke and iron ore went up considerably. China is a major exporter of coke, which is required by iron and steel industry. To meet the domestic demands of the local iron and steel manufacturers, the Chinese government curtailed export of coke, which resulted in coke prices going up. China was also importing iron ore, a raw material required for their steel industry. This resulted in huge exports of iron ore from India leading to increase in iron ore price in the Indian domestic market. As a consequence to the increase in price of both coke and iron ore, the price of pig iron had to be increased to compensate for the steep increase in input cost. The increase in price of pig iron could not be sustained for long, as many foundries opted for better priced steel scrap, which was available in plenty. This situation created a pressure on the margins and to control the erosion in the profitability, your company decided to shut down one furnace for three months when the price of coke had reached a peak level of $ 462 per MT. However in the second half of the year, the operating margins improved with stability in the market conditions and softening in price of coke. Though the impact of iron ore and coke cost increase was also felt in casting business, it was difficult to fully pass on the cost increases to customers of castings. Also increase in cost on items such as chemicals also put pressure on margins. However sustained demand of castings from both tractor and auto industries and with the increase in business volumes, the company was able to achieve a better capacity utilization. Higher productivity and reduced process rejections led to improved profitability in the foundry business. The automobile industry registered another year of strong growth, with passenger car segment growing by 18%, utility vehicles by 20.5% and commercial vehicles by 22%. The tractor industry recorded a growth of 30%, which is highest growth, in tractor industry, in the last 5 years. The growth in demand from Utility vehicles, commercial vehicles and the tractors helped the foundry to achieve higher capacity utiliasation. Year under Review: Now I would like share with you some highlights on the achievements of your company. The sales and operating income increased to Rs.500 Crores from Rs.385 Crores of the previous year, registering a growth of 30%. The increase in sales was due to increase in pig iron prices and growth in volumes as well as price in foundry business. Consequent to increase in sales and other income and due to cost control measures, the profit before tax for the year under review stood at Rs.20.8 Crores, as against Rs. 27.2 Crores in the previous year, after providing for depreciation and amortisation. There is a drop in profitability during the year under review with respect to the previous year as the buoyancy experienced in the last quarter of the previous year was absent in the first half of the year under review. The pig iron sale of your company was higher by 34% at Rs. 325.3 Crores (last year Rs 242.9 Crores) while the sale of castings was higher by 30% at Rs.121.7 Crores (last year Rs. 93.6 Crores). Other Sales was higher by 27% at Rs.50 crores (last year Rs.39.4 crores). The rise in pig iron sales was due to higher prices while the quantity sold was lower at 203091 MT (Last year 212002 MT). The production and consequently the sale of pig iron were lower in the year under review as one furnace was shut down for three months due to the adverse market conditions as explained earlier. In spite of this shut down, your company could achieve higher turnover for the remaining period of the year. Financial Review: The profit after tax for the year under review is Rs.21.83 Crores as compared to Rs 31.71 Crores in the previous year. The company has also has been able to prepay long term loans out of internal accruals and through the raising of new low cost borrowings. The interest cost in the year under review has been reduced due to the prepayments of high cost debts as well as repayment of other low cost loans. Taking into consideration the profit made by your Company for the year under review, your Board of Directors have decided to recommend a dividend Rs. 11.33 Crores to the holders of 12% Cumulative redeemable preference shares. Other Achievements of your company: Your company received 'a honest taxpayer award' from the Commissioner of Commercial Taxes, Government of Karnataka. Your company received the accreditation of TS 16949 Quality Management Certification, which would be useful to increase business with Automobile companies, worldwide. Industrial Relations: During the year, the industrial relations were cordial. Agreement with the Union has expired and the negotiations are on for the agreement for the next period. Business Scenario and Current year prospects: The prospects for overall automobile industry is projected to register double digit growth. The utility vehicle and light commercial vehicle segments are projected to have higher growth than the commercial vehicle segment. The tractor industry is revising its projections to marginal growth in the current year. The overall growth in the automotive industry will result into increased demand for castings. Multinational companies operating in industries like automobiles and diesel engines are setting up global purchasing offices in India. This will open additional markets for the castings. Your company is aggressively pursuing these new opportunities for export. The foundry continues to broad base the customer to reduce dependency on one industry sector. The dependency on the tractor industry for casting business has reduced from 57% during 2003-04 to 52% during the year under review, while the share of casting business from Automobile industry has increased from 32% in 2003-04 to 36% in 2004-05. This strategy will also help the company to increase its casting business. Coke prices have also started coming down from a high level. This will reduce the input cost in the manufacture of pig iron. Pig iron prices have also come down in line with coke prices. In order to minimize the fluctuation in the price of coke, your company has already entered into an agreement with a domestic manufacturer of coke for the procurement of coke through coal conversion route. The above arrangement will result in reducing the risk in price fluctuation and will also cater to the company's requirement of coke to the extent of 25% approximately of the coke consumption. Your company has also applied to the Government of Karnataka for the leasing of iron ore mines. Investment in railway siding at the company's factory premises will reduce the transportation cost of materials and setting up of MBF Stoves will result in reduction in coke consumption. All these steps should result in reduction in material cost. The current year 2005-06 has started off on a good note, which has been reflected in the results of the first quarter showing a turnover of Rs.129.11 Crores and a profit after tax of Rs. 4.78 Crores. Reduction in Equity Share Capital: Members are aware that the company had made profits in the initial years up to 31st March 1996 and there after started incurring losses. There after company took several proactive steps, which resulted in company turning around and registering profits for the last three years. However inspite of showing profits the company has accumulated losses of Rs. 74.13 Crores at the end of 31st March 2005. The Board of Directors at their meeting held on 10th June, 2005 felt it appropriate to consider a reduction issue and therefore proposed to the members recommending the reduction of 50% of the issued, paid up equity share capital aggregating to Rs.36.11 Crores for writing of the debit balance in Profit and Loss Account to the same extent. The balance of accumulated losses in the profit and loss account there after will be Rs.38.02 Crores. On receipt of your approval for reduction and on confirmation of reduction by the honorable High court, Mumbai, the equity share capital will stand altered. Members are aware, that the company has Rs.104.68 Crores of preference share capital. The Board of Directors is considering various options for redeeming the preference shares so that the liability on preference shares is eliminated and there after profit will be available for servicing of the equity shares. The reduction of equity share capital will therefore be in their long term interest. Corporate social responsibility: As responsible corporate entity the Kirloskar Group continues to discharge its social responsibility. In measure of support to the victims of Tsunami, which devastated the southern parts of the country, the group along with its employees contributed Rs. 71 Lakhs (of which KFIL's contribution was Rs.3 Lakhs) to Prime Ministers National Relief Fund. Your company has been supporting and providing assistance to the nearby villages by supply of good quality drinking water, educational assistance and medical assistance for the people. Besides effluent treatment of waste products and suppression of fugitive emissions through sprinklers, lot of attention has been given to improve greenery all around the plant, through massive tree plantation programs. Corporate Governance: Your board is committed to complying with the standards of corporate Governance. The Board has and will take steps and measures in fulfilling its responsibility and in ensuring transparency with regard to financial statements, internal control and investor related information. Acknowledgement : On behalf of the Board and myself, I take this opportunity to thank our Customers, Bankers, Financial Institutions and suppliers for the cooperation and assistance extended to your Company. I thank all the shareholders for their support and confidence posed with the Company. I also place on record my appreciation to the leadership of Mr. Gumaste and the teamwork displayed by the employees of your Company. Thank you ! ATUL C KIRLOSKAR Chairman Website : Source Date : 22-10-2005