- FY - 2019 - 2020
It gives me great pleasure to present to you the Annual Report of your Company forFinancial Year 2019-20. Our Chlor-Alkali business overall has been stable and the companyhas firmed up its plans for increasing its capacities to take advantage of the growingmarket demand in the long term for Chlor-Alkali products. This year marks successful firstfull year of operations of Oriented PVC Pipes business. The operations and results areencouraging and can be a growth engine to reach newer heights of your company.
Chlor-Alkali Segment Outlook
During the year there was a sharp fall in international caustic soda prices due tovarious geopolitical issues which affected the Global demand.
Domestic prices moved in tandem with the international prices. During the year therewas a sharp fall by almost 40% in the prices of caustic soda lye. Such a sharp fall wasnot seen for the last 10 years. The drop in the demand by the end users of the productlike the alumina industry coupled with increase in domestic capacities has led tosignificant pricing pressures in the domestic market.
Caustic Soda being a major inorganic essential commodity its growth has moved in linewith the growth of other segments. The Growth of Caustic and HCL has been between 5- 6 %for both the products in the past. However the impact of Covid-19 pandemic on thedomestic demand is likely to have an impact on the offtake of the Chlor-Alkali products inthe coming months.
Your Company has been closely following up with government authorities and otherstakeholders to complete the 200 TPD expansion from existing 125 TPD including setting upof desalination plant for the Chlor-Alkali unit at Puducherry in the financial year2020-21. However delay in few approvals has postponed the scale up of operations to 200TPD in the Financial Year 2019-20. This coupled with sharp drop in the prices ofChlor-Alkali products affected the Revenue and profitability of Chlor-Alkali Segment.However the PVC-O pipes segment of the Company has stabilised well in its first full yearof Operations and helped the company in setting off partly the downturn impact of theChlor-Alkali segment during the year.
In this backdrop the revenue from operations of the company has increased by about 6%compared to previous year while the PAT has increased by about 53%.
The financial year gone by was filled with significant challenges. While the domesticeconomy was showing signs of slowdown since beginning of the calendar year 2020 the worldwas hit by the Covid-19 pandemic having a significant impact on world economy andsocieties. This has led to a very deep slowdown in the Indian Economy.
PVC-O pipes Segment Outlook
During the year we have received BIS approval for our PVCO Pipes in November 2019.This will help in market penetration of our products especially in the Governmentsegment which is our major market segment. I believe in the coming years this Businesswould be one of our key focus areas as it has potential for rapid growth. The company hasinvested in second production line of Orientation and Extrusion Machines however wecould not commission the same during the year due to global travel restrictions in placedue to which the key commissioning team from overseas OEM manufacturers could not travel.The second line is expected to commission during the second quarter of FY 2020-2021leading to doubling of manufacturing capacity.
Green Field Project at Karaikal
During the year the company has formed a wholly owned subsidiary company viz ChemfabAlkalis Karaikal Limited to cater to the ambitious plans of greenfield expansion in theChlor-Alkali Segment and giving a boost to the Make in India' Program of thegovernment. Land for the project has been identified and taken on a long-term lease. Thecompany has plans to start with downstream Chlorine utilisation projects and alsothereafter add laid out plans for the design implementation and commissioning of the newChlor-alkali Capacity at the new location as well. The new location will help the companyin taking a big leap in terms of capacity expansion of the Chlor-Alkali Segment in thecoming years.
COVID 19 Impact and Measures adopted
In view of the outbreak of the Coronavirus (COVID-19) pandemic and in compliance withthe directives issued by the Government authorities and keeping in mind the safety andwell-being of all the employees and stakeholders the Company had effective March 232020 onwards shut down its manufacturing operations located at Puducherry (UT) and Sricityin Andhra Pradesh. The operations at PVC-O plant at Sricity resumed post the lifting oflock down restrictions. This has led to loss of production for a period during March toMay 2020. The Company expects to catch up to the shortfall in sales in the subsequentperiod. The operations at Caustic Soda Plant at Puducherry plant was resumed in a phasedmanner during April 2020 after taking adequate permissions and adhering to the guidelinesissued by the government. Company has been able to operate the caustic soda plant atPuducherry at 85% capacity from third week of April by being very agile in resuming plantoperations in coordination with government authorities and strong marketing efforts.
Company has mandated employees to work from home except for minimum workforce requiredfor operations of plant and business on rotational basis. All general precautions arebeing followed as per the directions of government authorities including office of thedistrict collector. Passes have been obtained from local authorities for travel ofemployees to work place. Vehicles and trucks coming into the factory are being regularlydisinfected. The factory premises and also the office areas are regularly disinfected.
A Covid-19 task force was created in the company with the support of a Doctor and OHSteam. Masks and hand sanitizer were provided to all CCALmates and also the contractworkers. Thermal scanning and social distancing at workplace have been made mandatory.Employees residing at the hotspot areas have been asked to work from home.
As a part of the CSR budget of the Company the Company has supplied Sodium HypoChlorite to local municipalities during March and April 2020. Sodium Hypo Chlorite hasbeen used as a disinfectant by the municipalities and the support by the company insupplying the product free of cost has been widely appreciated by the Puducherrygovernment.
Further company has organized supply of disposable masks/sanitizers / face shields forpreventive purposes via Government authorities and other NGO's and contribution toPuducherry COVID19 Relief Fund.
Even though presently there is a demand slow down I am confident that the company isnow well placed to recover from the slowdown and resume the growth plans. Company wouldcontinue to focus on internal cost optimisation and to improve the margins in thesedifficult times. Further with strong balance sheet and low leverage company is betterplaced to tide over the short-term uncertainties caused due to the outbreak of thepandemic.
On behalf of all your Board of Directors and on my behalf I express my sinceregratitude to the Central Government and State Governments of Puducherry and Andhra Pradeshand all our Stakeholders for their continued support. I specially thank all our CCAL matesfor their efforts commitment and their contribution to the progress of your Company.
I also take this opportunity to thank all the Directors on the Board for theirvaluable inputs.
I am confident that with the Growth Plans we have in place we will continue to growand create more value to all the stakeholders.
Suresh Krishnamurthi Rao