It has been a year of cautious optimism for CUMI and I am immenselypleased to share the highlights of FY 2021-22. The year commenced in the background of thesecond wave of the Covid pandemic reckoned to be the deadliest wave affecting the globe.Yet the impact on the economy and business operations was not as devastating as the firstwave owing to preparedness the shield of vaccination coupled with less severe lockdownconditions imposed by States balancing the health of its citizens and economy.
While the economy was on a revival path the fear of the pandemic'sthird wave and the emergence of the geopolitical crisis due to the intensified Russia -Ukraine conflict put the global economy back into a volatile condition towards the end ofthe year. Today global growth is expected to decelerate against the backdrop ofcontinuing disruption caused by Covid and supply bottlenecks. The rebound in the globalactivity together with supply chain disruption and higher food-energy prices havepushed up inflation in many countries. However unlike the rest of the world the risk forIndia is predicted to be lower backed up by strong national policies and the resiliencedemonstrated in the last few years.
Despite the challenging and volatile conditions the year 2021-22 hasbeen a milestone for CUMI. After a decade-long hiatus we at CUMI decided to forge aheadin our inorganic growth path. The CUMI team has been able to complete three acquisitionsin line with its long term plans - one domestic and two international. The acquisitions ofPLUSS AWUKO and RHODIUS Abrasives reaffirm our ability to thrive in tough volatileconditions. We look forward to growing stronger by synergising the strengths of eachother.
Organic growth has been encouraging. The demand side has been strongacross businesses with most of the economies coming back post the pandemic and thestandalone revenues have grown by 33%
and consolidated revenues by 26% showing a significant improvement inprofitability at both levels. The results have been driven by improved performance acrossall businesses throughout the year through enhanced efficiencies backed by volumerealisation growth and higher capacity utilisation. The significantly improvedperformance of the subsidiaries aided in the accelerated consolidated performance. TheCompany spent over Rs 1705 million towards Capex which was fully funded by internalaccruals. Also internal accruals funded the three acquisitions made during the yearaggregating to an investment of about Rs 6600 million. This is a valid testimony to theprudent and efficient liquidity management and robust cash flow position.
Despite increased cash outflows during the year to support the improvedperformance capex and acquisitions the Board of Directors have recommended a finaldividend of Rs 2 per share. Together with the interim dividend of Rs 1.50 per share paidearlier during the year the total dividend aggregates to Rs 3.50 per share which ishigher than the previous year dividends.
The Abrasives business recorded a 29% revenue growth during the year atstandalone and consolidated levels backed by improved volumes margin and better productmix. While the business concentrated on building further on its strong distributionleadership its focus on retail development also sharpened. At a consolidated level thebusiness was well supported by CUMI America and Volzhsky Abrasives the American andRussian subsidiaries. Sterling Abrasives the subsidiary in Gujarat recorded a stellarperformance for its agro-processing products driven by higher agriculture acreage duringthe year and new product development. Wendt (India) Limited a joint venture company alsoregistered its highest-ever revenue growth - 38% in the Super Abrasives business and 22%in Non-Super Abrasives and Machines business. However in the backdrop of the continuingpandemic conditions and other operational constraints posing limited opportunities forCUMI Abrasives and Ceramics Limited the subsidiary in China the Board of the subsidiaryis reviewing the continuation of its operations.
The revenue at the consolidated level grew by 23%. Maximisingopportunities in India backed by timely capacity enhancements and swift alternate productdevelopment the standalone business grew its revenues by more than 40%. The RussianSubsidiary - Volzhsky Abrasives Works registered a double-digit growth (in Roubles)despite the challenges faced in the last quarter owing to the intensified Russia - Ukraineconflict. Under the able local leadership the subsidiary continues to run its operationswith a greater focus on local demand. In the Electominerals business Foskor Zirconia(Pty) Ltd the South African subsidiary made a significant turnaround in its performanceregistering a double-digit growth on the back of increased demand and improving itsoperational efficiencies and tightening its sales and distribution process.
The Ceramics business represented by Industrial Ceramics andRefractories & Composites grew by 27% at a consolidated level with subsidiaries inAustralia and America registering growth despite challenging business conditionsincluding the logistic issues and cost challenges. CUMI (Australia) Pty Limited theAustralian subsidiary continued to grow its revenues and profits notwithstanding the tradetensions and adverse logistic conditions. In addition the standalone business which islargely export-oriented in Industrial Ceramics and projects in Refractories grew by asolid 32% signifying strong international and domestic business capabilities.
Other subsidiaries and associates
CUMI invested Rs 1150 million to acquire 72% equity stake in PLUSSAdvanced Technologies Private Limited (PLUSS) during October 2021. PLUSS and its wholly-owned subsidiary in the Netherlands became the subsidiaries of CUMI under thisacquisition. PLUSS is a speciality materials research and manufacturing company engaged inphase change materials for thermal storage and speciality polymeric additives. It is aniche technology company with good growth prospects and the acquisition is in line withour long-term goal of pursuing opportunities that leverage materials
sustainability. Furthermore phase change materials is a growingtechnology with versatile applications in pharma cold chain refrigeration & foodsupply chain medical devices buildings and HVAC applications offering good futureopportunities.
In February 2022 according to an asset purchase agreement executed inDecember 2021 with the Insolvency administrator of AWUKO Wandmacher GmbH & Co. KGGermany a Company undergoing insolvency proceedings the main assets including land &building plant & machinery fixed assets leased assets brands & trademarkpatent technical know-how and other intangible assets excluding cash and receivables hadbeen acquired by CUMI for Euro 8 million. AWUKO is a 120-year-old leading brand in CoatedAbrasives. Besides being one of the market leaders in leather and wood applications AWUKOhas a strong presence in metal and lacquer applications. AWUKO's makers with wide- widthcapabilities will provide a competitive advantage for CUMI. Backed by an experiencedprocess and application engineering team AWUKO's distribution base will help CUMI accessEuropean markets. However considering the operational challenges AWUKO has had as anentity prior to the asset purchase leading up to the insolvency process the stabilisationof the operations is expected to take some time.
February 2022 also marked the execution of a share purchase agreementfor acquiring all shares in RHODIUS Schleifwerkzeuge Verwaltungsgesellschaft mbH (RQSGmbH) and all limited partners' interest in RHODIUS Schleifwerkzeuge GmbH & Co. KG(RQS KG) (together RHODIUS Abrasives) from M/s. Gebruder Rhodius GmbH & Co. KG for anenterprise value of Euro 55 million. The change in control to RHODIUS Abrasives GmbH asubsidiary incorporated during the year concluded on 31st March 2022 with RHODIUSAbrasives and its subsidiaries becoming part of CUMI effective 1st April 2022. RHODIUSAbrasives is a leading global manufacturer of thin wheels well recognised for its highquality and performance. They are reckoned as leaders in product innovation with a uniqueprofessional segment product suite backed by a strong proprietary product productionprocess. They have a strong legacy of seven decades serving more than 100 countries withtrained and experienced employees backed by a committed leadership team. Infrastructure-led growth is expected to enhance the demand for thin wheels in India the United Statesof America and other international geographies. The CUMI-RHODIUS synergy will benefit bothentities by positioning them in a strong spot to play to potential and capitalise onglobal market opportunities.
We at CUMI believe that the above acquisitions offer mutuallybeneficial opportunities to all entities. The diversity of the new entrants into CUMI willprovide novel and fresh resources for growth and an opportunity to relook and align ourexisting processes and offerings. However the unified passion for serving our customersin the best possible manner will help accelerate the synergy benefits of theseacquisitions. As the overseas acquisitions were made by CUMI International Limited Cyprus(CIL) I wish to place on record my appreciation and thanks to the Board of CIL forspending their time and efforts in the fructification of these investments.
The continuing pandemic dampened the growth prospects of CUMI MiddleEast with a decrease in demand as was the case for the IT subsidiary Net Access Indiawhich despite a marginal growth in revenues was impacted by the lower demand forservices from its customers. On the other hand Southern Energy Development CorporationLimited the gas-based power generation subsidiary recorded a sales growth. However thevolatility of the gas prices in the last quarter of the year owing to the geopoliticalcrisis impacted margins and slowed down the acceleration.
Murugappa Morgan Thermal Ceramics Limited our joint venture recordedan improvement in performance owing to demand improvement in user industries with highercapital expenditure project orders. CIRIA another joint venture did reasonably wellbacked by a strong clientele and execution strategy and process.
Along with the improved performance amidst volatile business andeconomic conditions and effective timely execution of the planned inorganic growthstrategy the organisation continued to do what it does best. The year 2021-22 continuedto be a year of recognition of awards and accolades for CUMI. I am extremely proud andhappy to share with you that CUMI has been recognised as one of the 'Best ManagedCompanies' by Deloitte in its maiden programme launched in India this year. The awardsprocess was based on a stringent evaluation process encompassing internal processesstrategy and governance criteria. Among the other recognitions the Industry ExcellenceAward for the Electrominerals Business from the Ministry of Heavy Industries is yetanother noteworthy accomplishment for the organisation.
During the year the Company continued its Research and Development(R&D) activities in a focused manner and continued to create several IntellectualProperty Rights in Trademarks Patents and Design. The organisation's R&D is wellsupported by its seven centres registered with Department of Scientific and IndustrialResearch. The Company as well as its newly acquired subsidiary PLUSS have been awardedthe prestigious Global Innovation Technology Alliance Award (GITA) by Confederation ofIndian Industry - Government of India which recognise companies that have developedcutting edge technologies.
The contribution to the community and society at large continued withzeal and zest in dedicated Corporate Social Responsibility (CSR) programmes in the fieldof health and education with a focus on combatting the pandemic. In addition to themandatory CSR programmes executed as per the annual approved action plan the employeesvoluntarily engaged in good citizenship initiatives around the many plant locationsserving the neighbouring communities upholding the virtues of the Five Lights.
Safety at the workplace tops our priority list. The year was markedwith an enhanced focus on training and creating awareness at shop floor levels and acrossthe organisation. The learning and development initiatives to hone employees' skills andknowledge levels continued with rigour during the year with structured programmes likeCUMI Leadership Programme (CLP) Business Leadership Progamme (BLP) and CUMI Super Star.Employee health and safety continues to be monitored and despite the normalisingconditions with the pandemic becoming less severe we at CUMI have not let our guard down.Dedicated vaccination drives helped us achieve almost 100% vaccination for our staff.These camps were also extended to employees' families and our business partners. Thehygiene and safety protocols continue to be practised in the interest of the overallwellbeing.
In the previous year in line with our purpose of engineering materialsscience solutions for an enduring planet we had crafted our Sustainability Policy. Thisyear the CUMI team put it into action with a 25:25 goal - aiming to reduce intensity ofenergy waste emissions and water by 25% from current levels by the year 2025. I am happyto report that all businesses have commenced their efforts towards achieving this goal andlooking forward to sharing with you our progress over the next few years.
It is also laudable to note the significantly improved performance -both organic and inorganic in a year struck by volatile pandemic conditions severelogistic issues supply chain constraints and which ended at the peak of a geopoliticalcrisis led economic turmoil. These results have been because of the tireless efforts ofour employees across the globe ably led by N Ananthaseshan Managing Director andSridharan Rangarajan Director - Finance & Strategy. The leadership teams of thesubsidiaries and associates and the Business Group Management Committee of CUMI have doneexceedingly well to lead the teams by example in demonstrating not only to survive underdifficult conditions but to emerge stronger by converting challenges into opportunities.The role played by the Corporate functions like Finance Treasury Compliance Legal andHuman Resources in concluding multiple acquisitions in a time-bound manner is commendable.On behalf of the CUMI family I extend a hearty welcome to the teams - PLUSS led by SamitJain; CUMI AWUKO led by Robert Wehowsky Thomas Muller Fabian Hoffmann and Ton Hintzen;RHODIUS Abrasives led by Bernd Lichter Klaus Rudolph and Ernst-Henning Sager. We lookforward to working with them to create enduring quality solutions for our globalcustomers.
I am very thankful to my colleagues on the Board for their continuedsupport and wise counsel. They have been a great source of inspiration to me personallyand have been most generous with their time and wisdom in a buzzing year like the last.Besides ensuring sound governance and adherence to our value system their activeinvolvement in guiding encouraging and challenging the management team has beeninvaluable.
In closing we thank all our stakeholders - customers suppliersvendors bankers regulatory authorities legal advisors investment advisors financial& tax advisors consultants and of course you - our shareholders for your unstintedsupport and belief in all that we do in forging new paths ahead.
|With warm regards |
|MM Murugappan |