Balmer Lawrie Vanleer Ltd.
|BSE: 505864||Sector: Industrials|
|NSE: N.A.||ISIN Code: INE920D01015|
|BSE 05:30 | 01 Jan||Balmer Lawrie Vanleer Ltd|
|NSE 05:30 | 01 Jan||Balmer Lawrie Vanleer Ltd|
|BSE: 505864||Sector: Industrials|
|NSE: N.A.||ISIN Code: INE920D01015|
|BSE 05:30 | 01 Jan||Balmer Lawrie Vanleer Ltd|
|NSE 05:30 | 01 Jan||Balmer Lawrie Vanleer Ltd|
(Including Report on Management Discussion & Analysis)
TO THE MEMBERS OF BALMER LAWRIE-VAN LEER LIMITED
Your Directors are pleased to present 54th Annual Report of the Company and AuditedFinancial Statements for the year ended March 31 2014.
Rs. In Lacs
The Board has recommended a dividend of 12% or Rs.1.20 per Equity share of Rs.10/- eachfor the year ended March 31 2014. The Board has further proposed a transfer of Rs.15.00Lac to "General Reserve".
Despite continued slowdown and subdued business confidence your Company's TotalRevenue for the year ended March 31 2014 grew by 25 % from Rs. 21155.50 Lac in previousyear to Rs. 26404.98 Lac. However continuing impact of higher inflation higher interestcosts rising input costs and sudden depreciation of INR versus USD during the year hadan adverse impact on operating margins. Operating Profit was marginally higher at Rs.1501.61 Lac as against Rs. 1407.50 Lac in previous year. Profit before Tax was lower atRs. 677.40 Lac as against Rs. 832.33 in previous year. Profit earned in 2012-13 was highermainly due to onetime write back of provision made towards payment of interest againstloan taken for purchase of shares in the joint venture of the Company M/s. TransafeServices Limited ("TSL") amounting to Rs. 294.50 Lac.
STEEL DRUM CLOSURE DIVISION-Mumbai
The domestic demand continued to be robust. Improvement in exports helped the Companyto sustain operations at higher level. Stable steel prices and depreciation of Rupeeversus USD helped o t post higher sales and improved margins. The Division achievedincreased sales of Rs. 7656.48 Lac and Profit before Tax of Rs. 355.00 Lac as against Rs.6744.82 Lac and Rs. 188.58 Lac respectively in the previous year.
PLASTIC CONTAINER DIVISION-Mumbai
With the commencement of production of Large Blow Moulded drums at Dehradun some ofthe north based Customers earlier serviced by Mumbai Plant were shifted to Dehradun.However local demand remained buoyant and capacity vacated due to shifting was fullyabsorbed. Sales revenue of Plastic Container Division Mumbai grew from Rs. 11038.52 Lacto Rs. 14057.76 Lac during current year.
Constant increase in polymer prices unfavorable exchange rates and increase in powercost had severe negative impact on the margins. The Division suffered an exchange loss ofRs. 278.13 Lac during the year and posted a marginal loss of Rs. 35.99 Lac as against theprofit before tax of Rs. 225.10 Lac in the previous year.
PLASTIC CONTAINER DIVISION-Chennai
Power issue continue to affect normal production and consequent use of D.G. set forproduction to keep the operations going impacted the operational costs. Severe Competitionand shrinkage of demand lead to lower value addition. This together with sharp Rupeedepreciation against USD had an adverse impact on margins and financial performance of theDivision. The Division suffered a loss of Rs. 28.54 Lac on account of exchange. TheCompany has plans to turnaround the performance of the Division by improving productivitychange in marketing strategy and conversion of more customers to V200 drums.
While Sales during the current year increased from Rs.2235.86 Lac to Rs. 2618.76 Lacthe Division suffered a loss of Rs. 163.93 Lac as against loss of Rs. 159.89 Lac incurredin the previous year.
PLASTIC CONTAINER DIVISION-Dehradun
This Division performed better both in terms of productivity and sales. During the year2013-14 the Division commenced commercial production of Large Blow Moulded drums and hasreceived a good response from the market. Sales Income of this Division grew from Rs.1136.30 Lac to Rs. 2071.98 Lac and the Division made a profit before tax of Rs. 90.95 Lacas against Rs. 53.69 Lac earned in the previous year.
CLARIFICATION ON QUALIFICATION IN AUDIT REPORT
The statutory auditors M/s. Walker Chandiok & Co. LLP has qualified their report onCompany's Accounts for non-provisioning of interest expenses amounting to Rs. 163.61 Lacon a loan from M/s. Balmer Lawrie & Co. Limited (BL) in accordance with terms of suchloan agreement. According to Statutory auditors there is overstatement of profit to theextent of Rs. 163.61 Lac.
The statutory auditors M/s. Walker Chandiok & Co. LLP has further qualified theirreport on Company's Accounts for non-provisioning for diminution in value of investmentamounting to Rs. 1817.92 Lac in Equity shares of Transafe Service Limited (TSL) despitecomplete erosion of net worth of Transafe Services Limited as per their audited accountsas at 31st March 2013 and 31st March 2014.
The Company had made a strategic investment by acquiring 11361999 Equity Shares ofTSL in 2009 by availing 100% loan from BL. Subsequent to this investment TSL hascontinuously reported losses. Consequent to losses and erosion of net worth the value ofthe investment held by the Company has also reduced.
However the Company is of the view that the Company's financial interests are protectedeven in the unlikely event of net worth of TSL being not restored as clause 1.3 of theLoan Agreement dated July 31 2009 executed between Company as "Borrower" and BLas "Lenders" confirms that erosion in value of investment will have no financialimpact on the Company.
A legal opinion was sought and the Company was advised that as per the clause 1.3 ofthe Loan Agreement the loan availed by the Company from BL is a non recourse loan andtherefore there will be no loan repayment liability on the Company after the expiry ofperiod of 60 months as per the terms of loan agreement.
The Company had made a provision for interest amounting to Rs. 294.50 Lac on the saidloan for the period from 1st April 2010 o t 31st March 2012.
During 2012-13 the Company after written communication to BL wrote back Rs. 294.50 Lacbeing interest accrued and due but not paid pertaining to period 2010-11 and 2011-12 andhas also stopped accruing any further interest on this loan. BL as lender has not raisedany claim for interest so far.
Since the loan is a non recourse the Company is neither liable for re-payment ofloan/interest nor provide for diminution in value of investment. Both Investment in sharesand Loan liability should get offset at the end of loan period.
During the current year the Company acquired the remaining 1078 Equity shares of Rs.1000/- each in Proseal Closures Limited from original promoters for a total considerationof Rs. 2200.00 Lac based on business valuation by an independent valuation agency. Theentire investment was financed through share application money received from promoterspursuant to preferential allotment of shares. After this acquisition Proseal ClosuresLimited has become 100% subsidiary of your Company with effect from 23rd January 2014.The Audited Annual Accounts for the year ended on 31st March 2014 together with Auditors'and Directors' Reports of the Company's subsidiary M/s. Proseal Closures Ltd. areattached herewith. The subsidiary company has reported Total Income of Rs. 8139.28 Lac asagainst Rs. 6436.53 Lac in previous year and a Profit before tax of Rs. 1220.75 Lac asagainst Rs. 705.28 Lac in the previous year.
Since the Equity shares of the Company are not listed on any of the stock exchanges inIndia as on 31st March 2014 the Accounting Standard-21 of the Institute of CharteredAccountants of India is not applicable and the Consolidated Financial Statements are notattached herewith.
INDUSTRY STRUCTURE AND DEVELOPMENTS
The Company operates in two main segments viz. Steel Drum
Closures and Plastic Containers.
Steel Drum Closures:
Market for Steel Drum Closures is primarily dependent on demand and growth rate ofSteel Drum Manufacturer which is steadily growing in alignment with growth in the economy.Despite overall economic slow-down inflationary pressures and subdued exports theperformance of Steel drum segment has remained robust. The FOB value of exports was Rs.4388.68 Lac as against Rs. 4222.94 Lac.
Indian packaging industry and Plastic Container industry in particular has displayed areasonable growth rate over the last few years. Plastic Containers as an alternative toSteel Drums by virtue of cost differential continue to enjoy preference and have widerapplication base both for consumer and industrial applications.
Your Company's products are well accepted in the market and Company continue to bepreferred supplier to most of the large corporate engaged in Lube & Oil Organic andInorganic Chemicals Printing Inks Construction Chemicals Leather Chemicals Spice Oiland Food and Beverages. During the year the Company achieved highest ever production andsales of large sized drums at Mumbai.
Your Company has also initiated an action to get its manufacturing facility at alllocations compliant with Global GFSI Standard to meet the specific requirement of Food andBeverage segment.
OUTLOOK OPPORTUNITIES THREATS RISKS AND CONCERNS:
The phase of uncertainty in economy lack of business confidence high inflationincrease in government spending and borrowings high fiscal deficits and rising fuelprices is showing the sign of cooling down. In recent time developed economy like US andsome countries of Europe have started showing sign of positive growth. Indian economyduring last two year suffered due to rise in fiscal deficit widening of gap in balance oftrade causing sharp depreciation of rupee vs. USD and high commodity prices. This impacteddomestic industries earnings badly. However Export oriented industries could postimpressive performance due to wild fluctuations in exchange rate.
"Trisure" make Steel Drum Closures is a brand recognised world over. Many ofthe large users of steel drums in India categorically specify the use of Trisure"Closures as pre-condition for all drums procured by them. The Company expects to retainthe dominant position in the domestic market and continue to reap benefits of organic andexpansionary growth of these sectors and Customers.
The Company's "Valerex"' brand drums with its aesthetic appearance and thebest possible strength to weight ratio continue to be preferred as premium packaging invarious segments like Lubricants Food Construction and other Speciality Chemicals.
Reduction in exports can pose a serious challenge to sustainability of Steel DrumClosures business due to under utilization of capacities.
With rising polymer prices the cost differential between steel drums and plastic drumshas narrowed and some of the customers may shift to steel drums if the trend continues.
The proliferate growth in the number of competitors especially in large sized Blowmoulded drums is a threat to value addition which can only be compensated by highervolumes improved efficiency and better customer service.
RISKS & CONCERNS
Your Company recognizes that risk is inevitable and is an integral part of anybusiness. In today's dynamic market conditions the business complexity has been multifold.It is therefore imminent to identify review and take corrective remedial action on time.The Impact can be minimized if at least not eliminated. Company has identified andclassified the business risks as Business cyclical risks Customer or Vendor Concentrationrisks Competition risk Credit risk Exchange risk Regulatory and Compliance Risk. Someof the major risks and concerns are enumerated below:
Steel Drum Closure business is primarily dependent on exports and any deterioration ineconomic conditions escalation of geopolitical tension or political instability ofimporting country can impact the Company's business.
Non availability of adequate and continuous power in state where Company's units arelocated can impact the business and margins of the Company.
Continuation of high inflation and commodity prices can adversely affect the industrydemand and product margins.
High interest cost leading to slump in sales of automobile industry can impact the oil& Lube sector and reduced demand for packaging.
Company's high dependence on one supplier for HMHDPE principle raw material andlimited negotiation power can impact the business continuity and margins.
Company's high dependence on the Joint Venture partners for sale of steel drum closuresand on few big customers in oil and lube sector for Plastic Containers the business risksattached to their business can affect the performance of your Company.
Sizeable capacity additions by both existing players and new entrants can lead toincrease in completion amongst each other and can lead to erosion of market share andmargin.
With increase in capacities the Company has been selling on credit o t domestic market.Any failure to collect the money for any reason or dispute can impact the financialposition of the Company.
Any change in statutory compliance permissions and environment clearance may affectthe operations.
The Company has taken steps to address some of the risks through optimization ofoperations widening of Customer base development of vendors product innovations toreduce cost of operation and improve profitability. Company has started hedgingtransactions involving foreign exchange by booking forwards or utilizing inwardremittances for import payments. Foreign Currency exposure is reviewed at each Boardmeeting.
Adherences to statutory compliance under various statutes and acts are verified by theInternal Auditors every quarter and non compliance if any is brought to the notice ofBoard. Board reviews the report and advice suitable action. Board review the performancebusiness related risks from time to time and suggest remedial actions.
HUMAN RESOURCE AND INDUSTRIAL RELATIONS
Your Company understands the importance of a motivated and skilled human resource assource for of its competitiveness. Your Company strives to create a challenging maintaina favorable work environment and follows a policy that enhances employee engagementencourages entrepreneurial behavior innovation and drive employees towards businessexcellence. The company organizes in house training as also encourages the employees forparticipation in external training held by industry experts plant visits and attendingseminar and conferences.
Industrial relations continued to be cordial at all locations during the year. Anegotiation for Long Term Settlement with permanent workmen at Plastic Division Mumbai isin progress.
The Company has performance based variable pay scheme with weight-age on individualKRA's team Divisional and Company performance. Company's compensation policy includespayment of annual performance bonus based on evaluation of performance of each individualemployee by a committee from senior management. Senior management's performance isreviewed and remuneration/ annual increment is finalized under guidance of RemunerationCommittee.
The Company had 348 permanent employees (including permanent workmen and trainees) onits pay roll as on 31st March 2014.
SAFETY HEALTH AND ENVIRONMENT
Safety Health and environment protection continues to be key focus areas and one ofthe prime drivers of the Company's operating efficiency. The Company is committed toensuring zero injuries to its employees contract workforce and the communities ni whichit operates. The Company is focusing on training new initiatives and regularcommunications for improving safety at the work place across the organization.
Besides periodical in-house reviews and surveillance audits of ISO 9001 by an externalagency the Board reviews the performance against set standard and guides on deficienciesin safety health and hygiene conditions at workplace.
All the manufacturing units continue to be fully compliant with applicable localenvironmental regulations and have necessary consent for emission of effluents anddisposal of hazardous wastes.
INDPENDENT DIRECTORS & CORPORATE SOCIAL RESPONSIBILITY ("CSR")
Your Company has initiated an action for induction of Independent Directors on theBoard and re-constitution of existing Audit Committee Shareholders Grievance Committeeand Remuneration Committee to comply with the requirements under Companies Act 2013.
Your Company is in the process of forming a CSR Committee immediately after inductionof Independent Directors and frame a Corporate Social Responsibility Policy in alignmentand compliance of Rules under Companies (Corporate Social Responsibility Policy) Rules2014 and for the activities specified in Schedule VII of the Companies Act 2013.
Company acknowledges its' responsibility to community at large and has in pastparticipated in social programs by way of contribution for treatment of cancer patientseducation of poor student and vocational training for women to enable them to earnlivelihood. Company is committed to working in this direction.
INTERNAL CONTROL SYSTEMS AND ADEQUACY
The Company has in place adequate internal Control systems through establishedprocesses and procedures set up by the management. Internal control system provides for:
Reliability and integrity of financial and operational information
Adherence to applicable Accounting standards
Compliance with applicable laws statutes as well as internal procedures andpractices
Safe guard of assets and their proper usage
The Audit Committee of the Board review inter alia the adequacy and effectiveness ofthe internal control systems and environment. The Audit Committee at their meeting reviewthe performance (both financial and operating) internal audit and compliance reports andmonitors action initiated on internal audit recommendations including those relating tostrengthening the Company's risk management policies and systems.
The Board reviews quarterly and annual performance reports in comparison with thebudget and discuss with management the reasons for variation and analysis. Board approvesthe capital expenditure Budget for all operating plants.
Company has also engaged an external audit firm M/s.L. B. Jha & Co. CharteredAccountants to carryout periodical audits at all plants and of all functions and toreport on deviations from laid down procedures. Report also brings out degree of risksassociated and their recommendations to strengthen the business processes.
The respective HODs and plant/functional heads review the observations arising out ofthe audit in the first instance. Audit Committee consisting of Board members reviews thehighlight of this Report with comments from HODs and Unit heads on compliance and/orcorrective action planned along with 'Action Taken Report'.
During the year the Company made a preferential allotment of 2200000 Equity shares ofRs.10 each at Rs. 100 per share (including a premium of Rs.90 per share) to the PromoterCompanies viz. Greif International Holding B.V and Balmer Lawrie & Co. Ltd.Pursuantto allotment the paid up share capital of the Company has increased from Rs.1576.34 Lacto Rs.1796.34 Lac. The entire proceeds from issue of shares were utilized for acquiringremaining 49% shareholding of Proseal Closures Limited.
The Company has not accepted/renewed any fixed deposits from public during the year.There are no unclaimed deposits.
LOANS ADVANCES & GUARANTEES
Your company has not granted any loans (secured or unsecured) advances or issuedguarantees to companies firms or other parties covered under Section 189 of the CompaniesAct 2013
RELATED PARTY TRANSACTIONS
The commercial transaction with promoter Companies subsidiary and associate companiesof promoter companies for purchase and sale of goods and/or services or use of facility(s)are in ordinary course of business and are disclosed in annexed financial statements atNote 41. These transactions are carried out at arm's length prices after detailednegotiation.
ICRA Limited a Rating agency has maintained Company's Short term rating to A2+(pronounced as ICRA A two plus) and long term ratings to LA- (pronounced as ICRA A minus)
DIRECTORS n I accordance with the provisions of the Companies Act 2013 and theArticles of Association of the Company Mr. Anand Dayal (DIN 03368900) and Mr. KannanAnanthakrishnan (DIN 05281184) retire by rotation and are eligible for re-appointment.
M/s. Walker Chandiok & Co. LLP Chartered Accountants retire as auditors of theCompany at the ensuing Annual General Meeting and are eligible for re-appointment. Thecompany has obtained necessary consent and confirmation as required under the
Companies Act 2013 from auditors.
M/s. Musib & Associates Cost Accountant has been appointed as the Cost Auditorsfor conducting audit of the cost records maintained by the Company for the year ended 31stMarch 2014.
PARTICLUARS OF EMPLOYEES
None of the Employees of the Company are drawing remuneration in excess of Rs. 60 Lacper annum or Rs. 5 Lac per month if employed for a part of the financial year as on 31stMarch 2014.
CONSERVATION OF ENERGYTECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGOCONSERVATION OF ENERGY
Replaced old Acrylic sheets fitted on factory roof at Plastic Container
Division Mumbai with new Acrylic sheets which improved day light and helped to keepfactory lighting switched off during day time. This resulted in saving of approx. 54750units per annum.
Replaced standard motor based convention hydraulic pump with Servo Motor and Servo Pumpin V20 Injection Moulding Machine IM-1 at Plastic Container Division Mumbai whichresulted in saving n i power during idle time and reduction in consumption. This resulted. in saving of approx. 61320 units per annum.
At Steel Drum Closure Division Mumbai traditional copper-iron type rectifiers replacedby IGBT based energy saving rectifiers installed energy monitoring devices and sealed airleakages to save on power cost.
TECHNOLOGY UPGRADATION AND ABSORPTION
During the year the Steel Drum Closure Division changed plating process from HexavalentPassivation (CR-6) to Trivalent Passivation (CR-3) to give the product silver colourinstead of golden colour.
CR-6 process was toxic polluting and required extensive effluent treatment where asnew CR-3 process is non-polluting and environment friendly. The change was made as a partof implementation of green technology in the process.
Foreign Exchange earnings and outgo
Equity Shares of your Company are not listed on any stock exchanges in India and thecompany is not required to comply with the clause 49 of the listing agreement. HoweverYour Company believes and gives immense importance to the good Corporate Governance andbest industry practices. A detailed report on Corporate Governance is annexed which formsthe part of Board's report.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under section 217(2AA) of the Companies Act 1956 the Board of Directorsconfirms that:
I In the preparation of the annual accounts the applicable accounting standards havebeen followed other than reported by auditors in their report and that there are nomaterial departures;
II. They have in selection of accounting policies consulted the Statutory Auditorsand have applied them consistently and made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company asat March 31 2014and profits of the Company for that period;
III. They have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act1956 for safeguarding the assets of the Company and fordetecting fraud and other irregularities;
IV. They have prepared the annual accounts on a going concern basis;
V. They have devised a proper system to ensure compliance with the provisions of allapplicable laws and are of the opinion that such systems are adequate and is runningefficiently.
Your Directors wish to thank Customers Suppliers Service Providers Bankers andShareholders for their continued assistance co-operation and support extended to theCompany. You Directors also wish to thank Promoter Companies for their assistancetechnical and financial support
Your Directors also wish to place on record their appreciation of continuedco-operation and commitment by all cadres of employees.