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NACL Industries Ltd.

BSE: 524709 Sector: Agri and agri inputs
NSE: NACLIND ISIN Code: INE295D01020
BSE LIVE 09:58 | 21 Nov 47.95 0.85
(1.80%)
OPEN

46.60

HIGH

48.05

LOW

46.60

NSE 09:49 | 21 Nov 48.00 1.05
(2.24%)
OPEN

47.00

HIGH

48.40

LOW

46.00

OPEN 46.60
PREVIOUS CLOSE 47.10
VOLUME 6856
52-Week high 52.50
52-Week low 16.40
P/E 65.68
Mkt Cap.(Rs cr) 749
Buy Price 47.55
Buy Qty 100.00
Sell Price 47.95
Sell Qty 100.00
OPEN 46.60
CLOSE 47.10
VOLUME 6856
52-Week high 52.50
52-Week low 16.40
P/E 65.68
Mkt Cap.(Rs cr) 749
Buy Price 47.55
Buy Qty 100.00
Sell Price 47.95
Sell Qty 100.00

NACL Industries Ltd. (NACLIND) - Director Report

Company director report

NAGARJUNA AGRICHEM LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT To, The Members, Your Directors have pleasure in presenting the 25th Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2012. Operating Results: Your Company's performance during the year as compared with that during the previous year is summarized below: (Rs. in Lakhs) Particulars 2011-12 2010-11 Sales/Income from Operations 64307 57008 Other Income 386 527 Total Income 64693 57535 Profit Before Tax 1424 643 Less: Provision for Taxation 693 335 Profit After Tax 731 308 Add: Surplus brought forward 14372 14360 Amount available for appropriation 15103 14668 Appropriations Transfer to General Reserve 40 35 Dividend - Interim Paid - 223 - Interim Corporate Dividend Tax - 38 - Final (Proposed) 224 - - Provision for Corporate 36 - Dividend Tax Surplus Carried Forward 14803 14372 Total Appropriations 15103 14668 Dividend: Your Directors are pleased to recommend payment of Dividend of Rs.1.50 paise per Equity share (i.e., 15% of the paid up Capital) for the Financial Year 2011-12, for your consideration and approval at the ensuing Annual General Meeting of the Company. The total dividend outgo would be Rs.259.72 Lakhs (including Dividend Distribution Tax). Performance: For the year 2011-12, your Company reported annual sales revenue of Rs.643.07 Crores against Rs.570.08 Crores recorded in 2010-11 registering an increase of 12.80%. This increase in sales could be achieved due to increase in production volumes and widening product range with focus on value added products. The Company recorded an Operating Profit (PBIDT) of Rs.47.47.Crores and Profit After Tax of Rs.7.31 Crores with respective growth of 33.98% and 137% over the previous year. The increase in interest cost is mainly due to higher current asset levels in the form of higher inventory and receivables due to the monsoon failure & other market conditions. The cash profits for the year under review were Rs.38.35 Crores as compared to Rs.28.20 Crores during the previous year. Plant Operations: Your Company's Srikakulam's Technical Unit achieved an Annual production of 5307 MT during the year under review compared to 4335 MT of the previous year. The plant at Srikakulam has been stable since May, 2011 after the labour issues were settled. Since then production has been steadily improving. Debottlenecking was done for few plants by investing about Rs.4.00 Crores. The continued focus on streamlining the production facilities, augmenting the plant efficiencies and enhance the productivity during the year have started yielding results. The Ethakota & Shadnagar formulating units continued to be normal as well and could meet the demand of domestic customer base. Various initiatives in the areas of production volume increase, quality control and supply chain have been taken to meet the enhanced marketing demand and effective / better customer services. However, rising input costs, erratic & irregular power supply from Electricity Boards, Rupee depreciation, manpower attrition etc. are the causes of concern. Fire incident in Srikakulam plant: As the Shareholders are aware, a fire was broke out in the block -5 of the Company's plant at Srikakulam on 30th June, 2012. Although, there were no casualties, 19 people who sustained minor injuries, were treated in nearby hospitals and discharged within 5 days. The safety mechanisms and systems in place had helped to keep the injuries to a minimum. The unfortunate incident drew extensive media coverage resulting panic reaction by the nearby villagers. The concerned Government Authorities such as Inspectorate of Factories, Pollution Control Board and RDO, have issued necessary orders. The main reason for the fire is being investigated by Factories Department. Your Company has initiated various measures towards meeting the additional requirements/compliances of the said Government authorities and improving upon various safety measures. Your management is confident of the addressing the concerns of all stakeholders viz: local villagers, public, employees/laborers, Government Authorities etc. and hopeful to restart the operations at the earliest. Domestic & Export Markets: The Indian Agrichemical market continues to be under pressure due to significant drop in rabi acreages in certain parts of the country coupled with excess availability of product. The local pesticide industry in general is stuck in a spiraling loop of falling price realizations, inability to pass on increased input cost, tough competition, credit problems and stock returns. The delayed monsoon in the previous year has also joined impacting the crops particularly in South India. This resulted in your Company's domestic sale reducing from Rs.331.10 Crores to Rs.316.57 Crores in the year under review. Towards focusing on farmers reach & touch, Marketing & Product Development department has been strengthened. Your Company has also initiated discussions with different leading International Manufacturers to introduce new products into India. Exports have shown significant improvement compared to the previous year, mainly due to stabilization of the Srikakulam plant. The Sales has increased from X158.59 Crores to Rs.208.04 Crores in the year under review. Contract (toll) manufacturing continues to be an important aspect of the Srikakulam production. The output is being increased in a few products due to increased demand, by debottlenecking. Relationship continues to be good with the Contract Manufacturing Customers. Work has commenced on selecting new products to offer to various existing and new customers. Windmills: Your Company has 3 windmills having a total capacity of 6.3 MW, located near Tirunelveli in Tamil Nadu. The operations of these are managed by M/s Suzlon Limited. The performance of the Windmills for the year was satisfactory. During the year under review, receivables from TNEB, who purchase the entire power generated as per the terms of the PPA, have been delaying their payments. The Industry has taken up the matter with TNEB. Sub-division of Shares: In order to facilitate the Shareholders to avail various inherent advantages of sub-division of face value of Equity Share of the Company viz: to improve liquidity of the Company's shares, to bring the share price down to a popular trading range, to attract new investors etc., the Board of Directors at its meeting held on 19th May, 2012 approved the proposal to sub-divide the nominal face value of the Equity Shares of the Company from Rs.10/- per Equity Share to Rs.1/- per equity share. The proposal is subject to approval of the Members and the requisite resolutions for such approval have been set out in the Notice convening this 25th Annual General Meeting. Strategic Investment: As part of growth strategy, your Company has inclined to expand its business activities and identified Fine Chemicals as an area of opportunity and accordingly identified USP Organics Private Limited (USP) as a Company worthwhile being associated with and made investment in order to expand its products. Your Company has invested a 26% stake in USP. USP has new and good production facilities located near Hyderabad. They have a an operating capacity of 225 MT per month. Your Company has started procuring certain chemicals used for manufacture from them. Subsidiary Companies and consolidation of Financial Statements: In Accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other Financial Statements /documents of the related Subsidiary Companies i.e., Nagarjuna Agrichem (Australia) Pty Ltd and LR Research and Laboratories Pvt.Ltd (which are yet to commence it operations / activities) are not being attached with the Balance Sheet of the Company. The Audited annual accounts and related information of subsidiaries as applicable will be made available upon request. Since the subsidiaries are yet to commence their business activities, as per clause 32 of the Listing Agreement with Stock Exchanges, applicable provisions of the Companies Act, 1956 and Accounting Standard (AS) 21, 17 and other applicable Accounting Standards, Consolidated Financial Statements and the Segment Reporting for the year ended on 31st March, 2012 are not provided in this Annual Report. Environment Protection: Emphasis on environment and preference of operations in healthy conditions remains a focus area for your Company. Towards driving various initiatives, new ETP was commissioned at Ethakota Unit and a new Scrubber System was commissioned at Shadnagar during the year. The operations of new Zero Liquid Discharge (ZLD) facility at Srikakulam Unit are in the process of being stabilized. Steps and efforts are in place in the direction of demonstrating improved environmental performance constantly. Your Company continues to enjoy the certifications ISO 9001:2008, ISO 14001 and OHSAS 18001 accredited for its proven standards covering in the areas of Quality, Environment, Safety and Health Management Systems respectively. Corporate Social Responsibility: As a responsible Corporate Citizen, the Company is carrying out various social activities in diverse fields. Such activities include but not limited to ongoing drinking water supplies to villages, contribution to Vidya Volunteer scheme and for construction of temple, providing land and other amenities for School playground, Mythri Police, Streetlight & borewell maintenance, development of school facilities, Community Centers & bus shelters in surrounding villages of the factories, providing medical services & vocational courses etc. Directors: In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company Mrs.K.Lakshmi Raju, Mr.K.Raghuraman and Mr.D.Rangaraju, Directors of the Company will be retiring by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. Mr.N.Vijayraghavan has resigned from the position of Whole-Time Director with effect from 29th October, 2011, However, he is continuing as a Director of the Company. Mr.Sukhendu Ray and Mr.P.K.Mallik, Directors have resigned with effect from 29th October, 2011 and 27th January, 2012 respectively. Mr.R.S.Nanda has resigned from the position of Director with effect from 18th April, 2012. The Board wishes to place on record the significant contribution that Mr. Ray and Mr. Mallik have provided to your Company during their association, with your Company for over 2 decades. The Board also wishes to place on record the contributions made by Mr. Nanda during his association with your Company. Auditors: M/s. M. Bhaskar Rao & Company, Chartered Accountants, Hyderabad, the Company's Statutory Auditors, retire at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to accept re- appointment and have further confirmed their eligibility under Section 224(1-B) of the Companies Act, 1956. Directors' Responsibility Statement: Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed that: i. In the preparation of the annual accounts the applicable Accounting Standards have been followed along with proper explanations relating to material departures; ii. The Directors have selected such accounting policies and 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 31st March, 2012 and of the profit of the Company for the year ended on that date. 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 fraud and other irregularities; and vi. The Directors have prepared the annual accounts of the Company on a 'going concern' basis. Transfer of Un-claimed Dividend: Pursuant to Section 205C (2) of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of investors) Rules, 2001 as amended from time to time, the un-claimed dividend aggregating to Rs.10,21,665/-(Rupees Ten Lakhs Twenty One Thousands Six Hundred Sixty Five only) for the final dividend of the year 2003-04 and interim dividend declared during year 2004-05 were transferred to the Investors Education and Protection Fund. The un-claimed final dividend for the year 2004-05 is due for transfer to the said fund account. Fixed Deposit: Your Company has not accepted any Fixed Deposits from the public during the year. Industrial Relations: The Industrial Relations at the Factories and Head Office continued to be cordial. Personnel: Your Directors would like to place on record their deep sense of appreciation of the devoted services of the Executives, Staff and Workers of your Company. In terms of the provisions of section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended from time to time, the names and particulars of the employees are set out in the Annexure-II to the Directors report. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo: Disclosures required under the provisions of Section 217 (1) (e) of the Companies Act, 1956 relating to conservation of energy, technology absorption and foreign exchange outgo and earning, and in terms of the Companies (Disclosure of particulars in the report of the Board of Directors) Rules 1988, are set out in a separate statement attached hereto and forms part of this report. Management Discussion and Analysis Report: Management Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement, is presented in a separate section, forming part of this Annual Report. Corporate Governance: A separate section on Corporate Governance and a Certificate from the Auditors' of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange forms part of the Annual Report. Acknowledgement: Your Directors thank the Company's Bankers and the Financial Institutions for their help and co-operation extended throughout the year. Your Directors place on record their appreciation for the support and co- operation that the Company received from its stakeholders, customers, agents, suppliers, employees, Associates and Community in the vicinity of the plants. Your Directors also record their appreciation for the excellent operational performance of the staff of the Company that contributed to the achievements of the Company. The Directors also acknowledge with much gratitude, the continued trust and confidence reposed by the Dealers / Customers of the Company. Your Directors look forward to the future with confidence. On behalf of the Board Dr.Nitish K Sengupta Chairman Place: Hyderabad Date : 9th August, 2012 FORM - A FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY POWER AND FUEL CONSUMPTION UNIT 2011-12 2010-11 1 ELECTRICITY: (A) PURCHASES Unit KWH 23934566 22659794 Total Amount (Net of Subsidy) Rs.in Lakhs 1024.33 935.37 Rate/Unit Rs. 4.28 4.13 (B) OWN GENERATION Through Diesel Generator Unit KWH 3355030 1640939 Unit per Liter of Diesel Oil Rs. 2.81 2.89 Cost/Unit Rs.in Lakhs 17.43 13.55 2. COAL (SPECIFY QUALITY & WHERE USED) C Rom - Used for Boiler Quantity MT 33170 28498 Total Cost Rs.in Lakhs 1134.66 880.93 Average Rate/Mt Rs. 3420.74 3091.19 3. FURNACE OIL Quantity KL 126.00 167.00 Total Cost Rs.in Lakhs 44.70 47.44 Average Rate/Mt Rs. 35479 28406 4. OTHERS/INTERNAL GENERATION Diesel/Furnace Oil Quantity KL 206.81 234.61 Total Cost Rs.in Lakhs 70.70 66.62 Rate/Unit (KL) Rs. 34187 28395.76 5. CONSUMPTION PER TONNE OF PRODUCTION Electricity KWH 4411.63 5098.79 Furnace Oil KL 0.02 0.04 Coal-Quality C Rom MT 6.27 6.57 Other (Specify)-Diesel/ Farm Waste MT 0.04 0.05 FORM - B Form for Disclosure of Particulars with respect to Technology Absorption and Foregn Exchange Earnings and Outgo A. RESEARCH AND DEVELOPMENT (R&D): 1. Specific areas in which : a. R & D Work on the existing processes R&D carried out by the to make them environment Company friendly and cost effective. b. Indigenous Process Developments for new products. 2. Benefits derived as a : Increased export business and improved result of the above R&D product quality. 3. Future plans of action : Introduction of new products through indigenously developed Technology. 4. Expenditure on R & D a) Capital : Rs.12,06,667/- b) Recurring : Rs.65,83,522/- c) Total Expenditure as a percentage of Total Turnover : 0.12% B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1 Efforts in brief, made : Increased size of R&D process development, towards technology purchase of new equipments and generation absorption, adaptation of process technical for new products. and innovation. 2. Benefits derived as a : a. The plants operate effectively with result of the above effort new addition of products. e.g. Product improvement, cost reduction, product b. Exports started growing. development, import substitution etc., 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the Technical Year) following information may be furnished a) Technology Imported : None b) Year of Import : Not Applicable c) Has Technology been fully Absorbed : Not Applicable d) If not fully absorbed, : Not Applicable areas where this has not taken place, reasons therefore and future plans of action C. PARTICULARS OF FOREIGN EXCHANGE EARNINGS AND OUTGO: i. Activities relating to : Exports are an important part of exports, initiatives taken Nagarjuna future growth strategy. to increase exports, As a result of new product introduction development of new export and Research & Development investments, markets for products and Exports have shown a satisfactory growth. services, and export plans ii. Foreign Exchange Outgo : Rs.in Lakhs and Earnings Foreign Exchange Outgo Raw Materials : 13,640.05 Capital Goods : 199.04 Traded Goods : - Others : 82.24 Total : 13,921.33 Foreign Exchange Earnings (FOB Value) : 19,686.07 MANAGEMENT DISCUSSION AND ANALYSIS This discussion is on the Agrochemical Business as it constitutes the main portion of revenues. Industry Overview: The Agrochemicals Industry plays a significant role in the Agriculture sector in India, which accounts for about one fifth of its GDP. The domestic market size of the Indian Agrochemical Industry is around Rs.12000 Crores and is expected to grow at 10 % per annum. India's growth rate compares with the highest in the world. With emphasis in agriculture by the Government of India the growth is expected to continue. India is currently the fourth largest producer of Agrochemicals globally, after United States, Japan and China. The current domestic consumption is also expected to grow driven by rising population, decreasing per capita availability of arable land and focus on increasing agricultural yield. The demand will also be driven by the rising food grain demand and increasing awareness about pesticide usage among the farmer community. The pesticide consumption is around 480 gm per hectare which is very low compared to countries like Japan, USA etc. The Indian market is served by many Companies. Being a generic market, ability to introduce me-too products is easy. Many small players have seized this and have a influencing presence in the market space. This has resulted in stiff competition and quality being compromised. Despite this, the attractiveness of the Indian market has made MNCs to set up shops in India over the past few years, through commencing business / acquisitions viz Maktisham Agan, Sumitomo and Arysta. Existing MNCs are implementing plans to grow. It is also to be noted that the Government is becoming active in reviewing products that have high toxicity levels. This has resulted in products being banned. Contract Manufacturing and Exports in India is around USD 1.8 Billions. Phillips MacDonald (a leading global publication in the pesticide industry) has indicated that the contract manufacturing is expected to grow, as MNCs are focusing on growth in the generic markets as new product developments is becoming more expensive. Opportunities: The growing requirement of agricultural products in India is a major opportunity. Having a good pan India presence through the large network of dealers and channel partners, your Company is in a position to seize the opportunities for growing in India. The growing presence of more MNC should bring in more discipline in the mid to long run in the markets which augurs well for the Industry. India is also a fast becoming a destination for contract manufacturing of generic pesticides by many Multinationals. This is due to the cost advantages and the technical skills available in the country. Your Company is one of the leading players in this field. As per a study by Task Force, Government of India, the Export and Contract Manufacturing market opportunity by 2020 is USD 7.3 billon. India has the opportunity to leverage on its strength to become a major player in this space. Many of the AI's (Active Ingredient) used in India are being imported from China. China is going through a phase of tightening its manufacturing facilities through introducing tougher pollution conditions. The Chinese currency Yuan is also appreciating thereby making imports into India costlier. This gives an opportunity for India to produce AIs and to be competitive in the global markets. Keeping the above in view, your Company is gearing up to meet these opportunities through strategies which will leverage its strength in the pan India dealer network and by introducing new formulations in collaborations with MNCs. It is also implementing various initiatives for improving its productivity and capacity utilisation in its plants to seize the Contract Manufacturing opportunities. Threats, Risks and Concerns: Timely arrival of the Monsoon, its quantity and spread continues to be a major concern for the entire Agri Sector in India. The high inflation and shortage of power to run the manufacturing facilities is also high in the list of concerns for the Industry. The stiff price competition in India makes it difficult for passing on the cost increases. In contract manufacturing the changing consumption patterns of pesticides in the global markets have an impact on reduction in the volumes. The higher cost of production due to power costs and inflation related costs are not easily passed through to the customers. Outlook: The pesticide business, despite the above concerns is an attractive business. There are many short term challenges for growth. Your Company is implementing various plans to leverage on its domestic network strength and as well as improving the efficiencies and productivity of the manufacturing facilities. Internal Control Systems: The Company has proper and adequate systems of internal controls, which ensure that all the assets are safeguarded and that all the transactions are authorized, recorded and reported correctly. The Company maintains adequate and effective internal control systems and suitable monitoring procedures with regard to the purchase of raw materials, stores, plant & machinery, equipment and other assets as well as for sale of goods. The Finance and Commercial Functions have been structured to provide adequate support and controls for the business of the Company. There is a Internal Audit System which focuses on all the main systems and processes. Financial performance: (with respect to operational performance) The Sale has shown a growth of 13% over the previous year mainly due to Exports. The EBIDT was Rs.74.43 Crores and has improved from last year of Rs.55.44 Crores due to improved sales. Interest was higher than previous year due to increase in working capital. The Long Term Debt Equity Ratio is 0.29 compared to 0.46 of the last year. The Company's improved financial and operations performance during 2011-12 and the positive outlook about the Company's continued growth in the years to come enabled the Board to recommend a dividend of 15% to the Shareholders. Industrial Relations and Human Resource Development: The number of employees in the Company as on 31st March, 2012 was 1123. The Company enjoys cordial and harmonious industrial relations. Training programs and various initiatives are being taken to create an environment to enhance individual and team performance. Cautionary Statement: The statements in the Report of the Board of Directors and the Management Discussion & Analysis Report describing the Company's projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable Securities Laws and Regulations. Actual results could differ materially from those expressed or implied since the Company's operations are influenced by many external and internal factors beyond the control of the Company. On behalf of the Board of Directors For Nagarjuna Agrichem Limited Dr. Nitish K Sengupta Chairman Place: Hyderabad Date : 9th August, 2012