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Neycer India Ltd.

BSE: 502255 Sector: Consumer
NSE: N.A. ISIN Code: INE275N01013
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Neycer India Ltd. (NEYCERINDIA) - Director Report

Company director report

NEYCER INDIA LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT Dear Shareholders, Your Directors are pleased to present their Fifty-first Annual Report together with Audited Financial Statements of your Company for the year ended March 31, 2012 FINANCIAL RESULTS: Parameters (Rs. In Lakhs) YEAR YEAR ENDED ENDED 31.03.2012 31.03.2011 Gross revenue 2442.98 2250.77 Less: excise duty 203.66 184.71 Net revenue 2239.32 2066.06 Other Income 95.22 48.07 Income 2334.54 2114.13 Expenditure 2106.16 1806.41 EBITDA 228.38 307.72 Less: Interest & Depreciation 214.46 215.89 Profit before taxation and extraordinary items 13.92 91.83 Less: Extraordinary items Profit before taxation 13.92 91.83 Less: Tax expense Current Tax Deferred Tax (419.80) - Profit/Loss after taxation 433.72 91.83 PERFORMANCE ANALYSIS: During the year the total turnover of the company has increased due to better market conditions. The company's total income has increased from Rs.2250.77 lacs in previous year to Rs. 2442.98 lacs in current year which showed 9% growth as compared to previous year. The 9% growth achieved for the year is lower on account of loss of production due to cyclone Thane'. Earnings before Interest, depreciation and taxation have been reduced to Rs. 228.38 lacs in 2011-12 from Rs. 307.72 lacs in the previous year 2010- 2011. The production was remained under pressure throughout the year due to increase in various cost components and competitive pressure rising from continuing creation/expansion of more capacities. Since the outlook for the industry appears to be positive, your Directors are hopeful in achieving better results based on the credible estimates on likelihood of robust demand over the terms. OPERATIONAL REVIEW: Your Company has already initiated steps for implementation of Scheme approved by BIFR and major part of the modernisation cum expansion program was completed during the last financial year. By this the Installed capacity of the company increased to 12500 Metric Tonnes per annum. However, due to delays in obtaining additional working capital from banks and the enhanced natural gas supply from the suppliers, much of the expanded capacity could not be operational almost till the end of the financial year. Thus the benefits of expansion are not realised in the financial year and excess fuel & operational costs were incurred in the year due to these delays. The company is strengthening its distribution network by various means for effective marketing of additional Quantitative shift in production. Due to cyclone Thane' the Kiln got fully damaged and installed capacity reduced by 3750 Metric Tonnes. Your Company's operations have been impacted by:- > The slow down in profits on account of loss of production due to cyclone 'Thane', leading to a lower margin. > Severe damage of Plant and Machinery due to the cyclone Thane', resulting in the shutdown of the plant during January 2012 and it took another two months to bring back the operations to a reasonable level. IMPACT OF CYCLONE 'THANE': Cyclone 'Thane' struck Cuddalore in the early hours of 30th December, 2011. Unfortunately, the factory happened to be the epicenter of the cyclone created havoc in the whole area including the factory with a wind speed of above 150-160 kmph which has resulted in a serious damage to the fixed assets of the company. The estimated damage caused by Thane' is to the tune of Rs. 7.80 crore for which the Company has preferred a claim with the Insurance Company. Due to this the entire factory was closed for almost a month during January 2012 and it took another couple of months to bring back the operations into a reasonable level thereby losing more than two months of production. The task of stabilization of the plant and bringing it back to its original state took around another 3 months. The damage to property and material are covered by insurance. The insurance surveyors who are assessing the loss are of the opinion that the claim settlement as per the insured value would be in the region of Rs.2.50 Crores and the balance to the extent of Rs.5.30 Crores have to be borne by the Company. This has further adversely hit the working of the Company and the loss inclusive of operational loss is estimated to the tune of Rs.7.50 Crore. Your Company has taken a number of initiatives to reduce the cost of production which should enable it to compete effectively and increase the sales volumes and margins. DIVIDEND: In view of the accumulated losses, the Directors express their inability to declare dividend. FIXED DEPOSIT: Your Company did not invite or accept any fixed deposit pursuant to provisions of Section 58A of the Companies Act, 1956, during the year. As on date there is no deposit which has matured and pending for payment. SHARE CAPITAL: During the year under review, there were no capital issues and hence no funds raised through share capital. IMPLEMENTATION OF REHABILITATION SCHEME SANCTIONED BY BIFR: The Board for Industrial and Financial Reconstruction [BIFR] has approved the rehabilitation scheme of your company on 06th October 2008 and the company has completed implementation of major activities approved by BIFR. In order to give effect to the various restructuring programmes as approved by BIFR, the company has also initiated the process of implementation of Capital Reduction and listing of securities in accordance with finalised position of allotment by strictly adhering to the directions given under scheme of BIFR resulting in profitable revival of the Company. BOARD OF DIRECTORS: In accordance with the applicable provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Mr. B.S. Shailendar, Director of the company, retire from the Board by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re- appointment. DIRECTOR'S RESPONSIBILITY STATEMENT: Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors' to the best of their knowledge and belief confirm that: 1. In the preparation of the Profit and Loss Account for the Financial Year ended March 31, 2012, and the Balance Sheet as at that date ('Annual Accounts'), the applicable accounting standards have been followed along with proper explanation relating to material departures; 2. That the Directors' had 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 at the end of the financial year and of the profit and loss of the Company for that period; 3. That the Directors had 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; 4. That the Directors had prepared the Annual Accounts for the Financial Year ended March 31, 2012 on a going concern basis. AUDITORS AND THEIR OBSERVATIONS: The Statutory Auditors, M/s. Suri & Co., Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment for the current financial year. The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval. Items under which auditors have commented in their report are suitably explained by the Director's forms a part of this report. Particulars as required under Section 217(1)(E) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988. A) Conservation of Energy: Your Company continues to be committed to energy conservation in its manufacturing operations. The new kiln which is just commissioned is expected to save fuel consumption by at least 40%. The power was economically and optimally utilised during the year. As the power costs are mounting from the Electricity Board, your company is exploring the possibility of installing captive generation. B) Technology Absorption: Your company is planning to adopt improved technology for better quality improvement, energy saving, material consumption and reduction of wastages. C) Research and Development: The Company has a continuous ongoing R 8s D Program which during the period under review introduced various designs of sanitary wares. In addition to development of new products, the R 8s D Department also institutated a comprehensive policy on cost reduction and improved production efficiency in line with modern trends so as to differentiate the brand positioning of 'Neycer' from other competitors brands. D) Foreign Exchange Earnings and Outgo: Foreign Exchange earned during the year: Rs. Nil (PY Rs. Nil) Foreign Exchange used during the year: Rs. 26.29 lakhs (PY Rs.4.43 lakhs) PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT, 1956: None of the employees of the Company are in receipt of total remuneration exceeding the limits prescribed under Provisions of Section 217(2A) of the Companies Act, 1956. Hence no reporting is furnished under the heading. CORPORATE GOVERNANCE REPORT: Your Company has been practicing the principles of good Corporate Governance. A detailed report on the Corporate Governance Code and practices of the Company along with a certificate from the Statutory Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreement are annexed in a separate section in this Annual Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: A detailed analysis of the Company's progress and future outlook is separately discussed in the Management Discussion and Analysis Report, is appended to and forms a part of the Annual Report. DIRECTORS REPLY TO AUDITORS QUALIFICATIONS: With regard to the observation of the auditors relating to non-provision of interest on the Term Loan and Loan from Body Corporate, the Board wish to state that the subject matter forms part of the Scheme approved by the BIFR and hence not provided. With regard to observation of Auditors in their report Annexure Clause 'IX', the statutory dues mentioned are payable over a period of 2 years as per the BIFR directives. ACKNOWLEDGMENTS: Your Directors take this opportunity to express grateful appreciation for the valuable support and co-operation received from Financial Institutions, Bankers, Shareholders, Creditors, various departments of Governments and all other stakeholders. The Directors also wish to thank the Time-share Customers who have supported the Company in this hour of need. Your Directors also place on record the wholehearted commitments from the employees of the Company and their combined efforts to turnaround the Company. For and on behalf of the Board Sd/- Sd/- Krishna Prasad Tripuraneni Y. Mohan Prasad Director Director Place: Chennai Date : 27-08-2012 ANNEXURE - A MANAGEMENT DISCUSSION AND ANALYSIS The financial year ending 31st March 2012, continues to be a difficult year of operations. The operations of the Company were also affected for three months during January to March 2012 due to cyclone 'Thane'. Improvement in the market during the year for our products has resulted in the Profitability. INDUSTRY SCENARIO AND DEVELOPMENTS: India is a large, highly populated Country of more than one billion people, with an economy, which is steadily growing. As per the research reports, in India, more than 60% of the population does not have access to sanitation systems. There is also a shortage of 50 million dwelling units. Low per capita consumption of sanitary ware (less than 2%), the perpetual shortage of dwelling units outlines tremendous potential for sanitary ware products. Housing and institutional sectors are the major growth drivers. At present, housing demand is rapidly rising and with increasing purchasing power people have started taking interest in premium sanitaryware products. Sanitaryware demand comes from new projects as well as from replacement market. Change in life style, high disposable income, concern for high quality toilets in middle income group segment and above is resulting high growth of high end sanitary products and this trend is likely to continue for the next Decade. To capitalize on the emerging opportunities in sanitary ware industry, all existing major players are going for capacity expansion and new entrants (including global brands) are setting up industry in India despite strong entry barrier for any new brand in the country. MARKETING AND DISTRIBUTION: Your company is currently focusing towards expanding the distribution network and is in the process of expanding the sales team and market coverage. Focus will be given for ascertainment of market feedback on a continuous basis so as to cater to the needs of the customers. Major thrust will be on introducing new products and re-enter most of the markets which were not serviced in the earlier years due to capacity constraints. FUTURE OUTLOOK: 'Neycer' is one of the oldest & reputed sanitaryware brands, known for its colours, designs styles and superior products with innovative features. Because of these factors NEYCER is able to withstand stiff competition from other brands without any significant investment in advertisement and promotion in the past decade. NEYCER has completed its modernization, capacity expansion of its existing manufacturing facilities at Vadalur by installing new modern imported kiln during the last financial year. By this the Installed capacity of the company increased to 12500 Metric Tonnes per annum. However, due to delays in obtaining additional working capital from banks and the enhanced natural gas supply from the suppliers, much of the expanded capacity could not be operational almost till the end of the financial year. Thus the benefits of expansion are not realised in the financial year and excess fuel & operational costs were incurred in the year due to these delays. The company is strengthening its distribution network by various means for effective marketing of additional Quantitative shift in production. Due to cyclone Thane' the Kiln got fully damaged and installed capacity reduced by 3750 Metric Tonnes. New products developed by your company have met with good response from the trade and the main challenge will be to quickly improve the yields and output with increasing experience of the workforce for these products. With additional manpower training and additional working capital availability from the 2nd half of the current year, we expect to improve the capacity utilisation and stabilisation of new capacity within the next 18 months. Your company needs to take up the next phase of modernisation of the plant for the balance portion, which will result in further fuel savings, improved productivity and reduced costs. The new investment proposals will be discussed with the bankers and appropriate funding structures will be decided. The company hopes to initiate this phase of modernisation within this financial year. Thus, despite many external adversities beyond the control of the company in the past 10 years, your company successfully withstood these and the restructuring process has been commenced by August 2009 onwards, over a period of two years the Directors of the company are confident of wiping the existing losses in the Books. Your Directors optimistically look forward to the growth years ahead from now onwards.