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Mihijam Vanaspati Ltd.

BSE: 519481 Sector: Others
NSE: N.A. ISIN Code: INE521C01013
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Mihijam Vanaspati Ltd. (MIHIJAMVANASP) - Director Report

Company director report

MIHIJAM VANASPATI LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT Your Directors have pleasure in presenting 23rd Annual Report together with the Audited Accounts of the Company for the year ended 31st March 2012. (Rs. in Lakhs) FINANCIAL RESULTS 2011-12 2010-11 Sales and Other Income 8711.25 10739.19 Profit before Depreciation, Interest & Tax 398.63 349.68 Less: Interest 213.51 216.91 Profit before Depreciation & Tax 185.12 132.77 Less: Depreciation 143.70 56.76 Profit before Tax 41.42 76.01 Less: Provision for current Tax 8.10 14.14 Deferred Tax 19.57 7.98 Add: Excess provision written back (0.11) (8.18) Net Profit, transferred to Balance Sheet 13.86 62.07 Balance brought forward from previous year 214.01 151.94 Total Balance carried to Reserve & Surplus 227.87 214.01 CORPORATE OVERVIEW: The turnover of the Company during the year under review has fallen to Rs.87l 1.25 lakh as compared to Rs. 10739.19 lakh in the immediately preceding year registering a decline of 1 8.88%. The profit before tax of your Company also has decreased from Rs. 76.01 lakh in the FY 2010-11 to Rs.41.42 lakh in the FY 2011-12 registering a decrease of 45.51%. The declines in the business turnover and profitability have occurred owing to the volatile foreign exchange market resulting in the steep increase in the exchange rates of U.S. Dollar. The international prices of crude palm oil also increased. Your Company is making every possible effort to preserve the financial health of the Company and all round containment of costs including focusing on the products on which the margins are better. DIVIDEND: The Company desires to conserve its resources for further restructurings. The Directors regret their inability to recommend any dividend for the year under review. RESEARCH & DEVELOPMENT: Your Company continued to adopt innovative measures in consultation with industry experts and other allies on a regular basis to provide superior quality products at competitive cost to its customers and bring in better efficiencies at its Plant RURAL AND SOCIAL DEVELOPMENT SERVICE: In continuity of its belief in the qualitative improvement of the community in the surrounding tribal areas, your Company continues to support various social/developmental work and cultural programmes conducted by the local population including the tribals. CORPORATE GOVERNANCE: Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are attached to this report and made a part of the Annual Report. DIRECTORS: During the year, Mr. Arup Roy, Director resigned from his post with effect from 21st October 2011. Your Company expresses its sincere appreciation and gratitude for his valuable contributions and services during his association with the Company. Mr. Vijoy Prakash and Mr. J.S. Mishra will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re- appointment. DIRECTORS' RESPONSIBILITY STATEMENT: As required under Section 217(2AA) of the Companies Act, 1956, your Directors, to the best of their knowledge and belief, confirm that: i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and that no material departures have been made from the same. ii) The Company has selected such accounting policies, applied 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 at the end of the financial year and of the profit of the Company for that period. iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities. iv) The Company has prepared the attached annual Statement of Accounts for the year ended 31st March, 2012 on a going concern basis. AUDITORS: Messrs. Lihala & Company, Chartered Accountants, Statutory Auditors, will retire as Auditors of the Company at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. The notes to the accounts referred to in the Auditors' Report are self- explanatory and therefore, do not call for any further comments. PARTICULARS OF EMPLOYEES, CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: Particulars of employees in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, are not given, as none of the employees qualifies for such disclosure. Particulars in regard to Conservation of Energy, Technology Absorption, etc., required under the Companies (Disclosure of Particulars of the Report of Board of Directors) Rules, 1988 are set out in a separate Annexure attached to this report and forms part of it. During the year under review, we have procured the raw materials (crude palm oil/palm kernels etc.) on 'High Sea Sale Basis' besides direct imports. The details of foreign exchange earnings and outgo are furnished in the Annexure to Directors' Report. APPRECIATION: Your Directors gratefully acknowledge the unwavering support given by the customers, suppliers, shareholders, employees, the Central Government and the State Government, banks and all other stakeholders and look forward to their continued support and encouragement in future. The Directors will endeavor to make the investment in the Company rewarding in near future. On behalf of the Board of Directors Place: Mihijam-815 354 (Jharkhand) Rajesh Agarwal Amit Kumar Agarwal Date : 29th May, 2012 Managing Director Director Annexure to Directors' Report: Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: Conservation of Energy: a) Energy Conservation measures taken: 1) Avoided energy leakages by regular preventive checks. 2) Regular repairs and renewals/replacements of parts have been done to preserve steam for\effective and better hydrogenation. 3) Installed stabilizers and other energy saving devices. b) Additional Investment proposal if any for the reduction of consumption of energy: This is being done on an ongoing basis including installation of new energy efficient equipments/appliances. c) Impact of the measures at (a) and (b) for reduction of energy consumption and consequent impact on the cost of production: Efforts are being made on regular basis to reduce energy consumption and consequently achieve reduction in consumption per unit of production. FORM 'A' A. Power and Fuel Consumption: 2011-12 2010-11 1) Electricity (a) Purchased Unit (KWH) 25,53,800.00 26,40,800.00 Total Amount (Rs.) 96,45,445.00 79,41,816.00 Rate per Unit (Rs.) 3.78 3.01 (b) Own Generation (i) Through Diesel Generator Unit (KWH) - - Units per Litre of Diesel - - Cost per Unit (Rs.) - - (ii) Through Steam Turbine/Generator Units - - Units per Litre of Fuel Oil/Gas - - Cost per Unit - - 2) Coal Quantity (Tonnes) 3,534.42 2,300.42 Total Cost (Rs.) 80,42,928.09 61,51,459.00 Average Rate (Rs.) 2275.60 2674.06 3) Furnace Oil Quantity (K. Ltrs.) - - Total Amount (Rs.) - - Average Rates (Rs. per Ltrs.) - - 4) Other (Briquettes)/Internal Generation (LPG & Other Gases) Quantity (Tonnes) - - Total Cost (Rs.) - - Rate per Unit (Rs. per Kg) - - A. Consumption per Unit of Production () Production (MT) 15484.1866 18909.3852 (i) Electricity (KWH/MT) 164.93 139.66 (ii) Coal (Kg/MT) 228.26 121.65 (iii) Furnace Oil (K.Ltrs./MT) - - (iv) Others - - FORM 'B' Research & Development (R. & D.) 1. The Company has not undertaken any expenditure (capital and regular) on research and development during the year under review. Foreign Exchange Earnings and Outgo: (a) Activities relating to export, initiative taken to increase export, development of new export market for products and services and export plans: The Company has not entered into the business of export of edible oil as the internal demand exceeds supply. (b) Total foreign exchange used and earned:- (Rs. in Lakhs) 2011-12 2010-11 (i) Foreign exchange earned 0.00 0.00 (ii) Foreign exchange used 6154.15 5547.31 (Value of Imports calculated on CIF basis) MANAGEMENT DISCUSSION AND ANALYSIS INDUSTRY STRUCTURE AND DEVELOPMENTS: Indigenous production of edible oil has not been able to keep pace with the increase in demand. Hence India continues to depend heavily on the supply of imported edible oils. Accordingly, Indian Vanaspati and Edible oil business remain exposed to international market trends and Government policies regarding import. The edible oil industry is one sector in India that may see considerable reform in the foreseeable future. During 2011-12 the country has imported over 9.5 million tonne of edible oils while annual domestic consumption stands at about 13 million tonne. India is the world's largest buyer of crude palm oil which represents 80% of its edible oil imports. Higher edible oil purchases driven up total vegetable oil imports to around 9.3 million to 9.5 million tonne including 8.2 million tones crude palm oil in 2011-12 from 8.8 million tonne last year. This makes India one of the largest importers of vegetable oils. A large population and rising household incomes make India a key area of growth in edible oil consumption. FINANCIAL AND OPERATIONAL REVIEW: Despite the overall difficult conditions, your Company has recorded satisfactory volume of turnover. The gross sales including other incomes and profit before tax during the year were Rs.8711.25 lakh and Rs.41.42 lakh respectively. The Company has undertaken vigorous efforts to streamline its operations and to broad-base its product profile for achieving better net sales realization. This has resulted in reduction in the cost of production/operations, besides improvement in profitability and long term sustainability. Due to the volatility in the foreign exchange market, particularly the steep increase in the exchange rate of U.S. Dollar, the Company has suffered certain losses in its operations resulting in the decline in the profitability. The Management has decided to take steps to hedge the exchange risks by booking forward contracts with the banks. The Management has also initiated steps to register itself with the National Stock Exchange for the purpose of risk coverage, by availing of screen based trading facility including futures and options through electronic exchange. The Company hopes to do better in the years to come. OPPORTUNITIES AND THREATS: The products of the Company are for essential and daily human- consumption. The per capita consumption of edible oil/fats in India is though on rise but still at a very low level in comparison to average consumption world- wide. With growing awareness towards health and rise in per capita income of the Indian consumers in recent years, the Company perceives a significant growth in the demand for its products in the years to come. Further, with broad basing of the products, the Company expects fresh in- roads in different market segments to have stability in its operations throughout the year. Thus, the outlook for the sector continues to remain positive. The threats are perceived mainly from reduced demand in domestic markets owing to erratic supply on account of unpredictable monsoon conditions in the palm-kernel growing countries and erosion in purchasing power of the domestic consumers. The products of the company being price sensitive, any change in global scenario or change in import duty on raw edible oil may have significant bearing on cost of production and consequent erosion in margins. OUTLOOK: Vanaspati and Refined Oils, being items of essential consumption, will always be in demand from household as well as institutional segments. Robust economic growth in the country augurs well for the demand of edible oil products. While consumption pattern in urban markets has shifted to refined oils, semi-urban and rural markets consume a mix of Vanaspati, raw/filtered oils and less expensive refined oils. The demand for Vanaspati and Refined Oils will continue to grow with increase in population and income levels. RISKS AND CONCERNS: The Company's brands may not have a pan India visibility. So the major brands with all India customer base may easily take a march over the Company's products. But the Company feels that with consistent efforts to maintain and improve the quality, its brands are well positioned in the State of Jharkhand which is showing commendable economic activities in the recent years. Thus, we can surely have a niche in the targeted markets. Further, the Company has plans to launch new brands in the premium segments keeping the burgeoning health conscious high end middle class and high net worth families. Location risk may place the Company away from its raw material sources making its presence unviable. But with the revolution in containerization of the international trade and the improvements in communication facilities in recent years the entire world has become a global village. So, sourcing the raw materials does not pose any problem. Moreover being in a backward area, the Company gets cheap labour on regular basis. It will also serve the Government's policy of decentralization of industries to provide employment to the local population. INTERNAL CONTROL SYSTEMS: The Company has adequate internal controls, systems & procedures with regard to purchase of stores, raw materials including components, plant & machinery, equipment and other assets and for sale of goods etc. The Company has clearly defined roles and responsibilities for all managerial positions and all operating parameters are monitored and controlled. The Company has internal audit system commensurate with size and nature of its business. Compliance with laws and regulation etc. are ensured and it is reported to the Board of Directors in every Board meeting. There is sufficient Management Information System in place to ensure that the books of accounts are properly maintained checked and kept up to date, various consents/licences/permission etc. stand renewed or followed up with the concerned authorities and various statutory statements/returns etc. are regularly submitted to different authorities. The finance and commercial functions have been structured to provide adequate support and controls for the business of the Company. Standard operating procedures and guidelines are issued from time to time to support best practices for internal controls. All financial, operating and information technology systems are being evaluated from time to time. ENVIRONMENT & SAFETY: The Company recognizes the importance of achieving and demonstrating sound environmental safety norms by controlling the impact of its manufacturing activities on the environment. The Company's environmental policy requires compliance with environmental legislations and prevention of pollution and to make efforts for constant improvements in the environmental safety. The Company regularly renews Consents under Section 25 of the Water (Prevention and Control of Pollution) Act, 1974 and under Section 21 of the Air (Prevention and Control of Pollution) Act, 1981 and Authorization under the Hazardous Waste (Management & Handling) Rules 1989 as amended from time to time under Environment Protection Act, 1986. The Company is making constant efforts to keep the ambience in a pollution free manner by laying gardens, planting trees and beautifying the precincts of the factory. Fire-Extinguishers and sand bags are placed at the required places. Medical facilities/first aid kit etc. is in readiness for the safety of the employees. INDUSTRIAL RELATIONS & HUMAN RESOURCE DEVELOPMENT: The Company firmly believes that the human resources are the most important resources at its disposal. Constant efforts are being made to interact with the employees/workers with a view to improving their knowledge, skill and problem solving capacities. The Company is committed to provide training opportunities to employees in order to equip them with belle: skills which enable them to adapt to contemporary technological advancements. Industrial relations continue to be harmonious thorough-out the year. CAUTIONARY STATEMENT: Statement made in the Management Discussion & Analysis describing the Company's objectives, projections, estimates, expectations may be 'Forward- Looking Statements' within the meaning of applicable securities law & regulations. Actual result could differ from those expressed or implied. Important factors that could make a difference to the Company's operations include global and domestic demand-supply conditions, price fluctuations in the raw materials, technological changes, changes in government regulations, tax laws & other statutes, conditions impacting conduct of business and other incidental factors.