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Continental Construction Ltd.

BSE: 507956 Sector: Infrastructure
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Continental Construction Ltd. (CONTNLCONS) - Director Report

Company director report

CONTINENTAL CONSTRUCTION LIMITED ANNUAL REPORT 2001-2002 DIRECTORS' REPORT To The Members Continental Construction Limited New Delhi Dear Members, Your directors take pleasure in presenting, the 39th Annual Report of your company together with the audited financial statements for the year ended 31st March 2002. State of Affairs: Inspite of the continuing cash crunch faced by the company the working results of the company during the year under review have been satisfactory. There is no change in the status of realization of overdue payments from Iraq under the Indo-Iraqi Deferred payment Agreements (DPA). However, with the concerted efforts of the management, major portion of the long outstanding dues in respect of the Wadi Ghan Dam (Libya) have been received as per MOU dated 24.6.99 of EURO 4.77 million (Rs.197.36 million), which has substantially improved the working capital position position of the company. Further, during the year under review, a sum of US $11.01 million (Rs.528.61 million) has been received from the UNCC as balance of retention money, work bills, property and equipment taken over by the Government of Iraq. The utilization of this amount net of the legal fees is restrained by the High Court/Debts Recovery Tribunal, Mumbai, and is thus held in bank deposit accounts as security. ISO Certification: The management is pleased to inform that in recognition of work excellence and maintaining international standards, your company has been certified as ISO 9001:2000 by Det Norske Veritas (DNV) with effect from April 2002. Dividend: Despite having large book profits, your directors regret their inability to recommend the payment of dividend to the shareholders for this year also mainly to conserve the resources for further development of the business of the company The members will appreciate the reasons and compulsions of your directors for having to take such an unpleasant decision. Status of Current Projects: (i) Kakrapara Left Bank Canal Project: Upon completion of the maintenance period, the client has finally taken over the completed project for the rehabilitation of Kakrapara Left Bank Canal in Gujarat state. However, due to paucity of funds with the Gujarat government, part payment of our final dues/claims are still held up. (ii) Kodasalli Dam: Consequent to the project being taken over by the client with effect from July 2000, the maintenance period for Kodasalli Dam Project in Karnataka has since been completed in January 2002. (iii) Jammu-Udhampur Rail Link Project: The contract fur Jammu-Udhampur Hail Link Project has been executed and handed over to the client. (iv) Larji Hydro-electric project and Ambavane Dam Project: The works of Larji Hydroelectric Project in Himachal Pradesh and Ambavane Dam Project at Lonavala, Maharashtra are progressing satisfactorily. (v) Others: There is no change in the status of Haryana Highway Project (Haryana), Ahmedabad-Vadodara Expressway Project (Gujarat) and Naval Dockyard Project in Mumbai, and the stalemate continues as before. Similarly there is no change in the status of Libyan Road Contract also. New Projects Awarded: S. Name of the Project LOA/Agreement Date Value No. (Rs. In million) 1. Maneri Bhali Hydroelectric Project (304 MW)-Stage-II: Construction of Barrage, 09.07.02 1372.1 Intake Structure, Sedimentation Chamber, Flushing Conduits, Fore Bay, Tunnel Control Structure, Cut and Cover Portion of Head Race Tunnel and Head Race Tunnel (upto 4.5 Kms from Intake and Portal) and the Appurtenants thereof in Uttranchal 2. Kol dam Hydroelectric Power Project (800 MW): Construction of two nos. 29.06.02 1666.4 diversion tunnels in Himachal Pradesh 3. Latji Hydroelectric Project- (126 MW): Construction of Highway 21.06.02 193.6 Tunnel Larji hydroelectric project in Himachal Pradesh 4. Jammu-Udhampur Rail-Link Project: Laying of ballastless track 30.05.02 68.0 in tunnels 5. Hospital Building - Phase-I: Construction of 500 bed 08.01.02 68.6 hospital for Vivekanand Medical Trust at Palampur, Himachal Pradesh Subsidiary Companies: (i) Continental Papers Limited (CPL): Working results of CPL for the year have been separately annexed to this Annual Report. As the paper mill is not in operation for quite some time and there is little possibility of recovery of the outstanding investments & loans, provision of Rs.100 million has been made thereagainst. (ii) Punjab Ceramics Ltd., (PCL): PCL is under liquidation and there is least possible chance to realize the investments and recovery of outstanding loans and advances of the Company. Hence it is decided to write off this amount. Joint Ventures: The works at Nathpa Jhakri Hydro Electric Project in H.P. being executed in Joint Venture with a Canadian Company are progressing satisfactorily. The carry forward loss of CFJV has since been wiped out in the current year and the project is now running in profit. The project is expected to be completed within the revised time schedule prescribed by the client. There is no change in the status of the road project with Sahl AI Jafara Co, in Libya. Directors: Sarvashri S.K. Aggarwala, Gokarn Singh and S.S. Gupta were appointed as additional directors of the Company with effect from 16th December 2001, 11th March 2002 and 27th March 2002, respectively. They hold the office of director till the conclusion of ensuing Annual General Meeting. The Company has received notices in writing under Section 257 of the Companies Act, 1956, from members of the company proposing Sarvashri S.K. Aggarwala, Gokarn Singh and S.S. Gupta as candidates for appointment as directors, liable to retire by rotation. Your directors recommend their appointment. The necessary resolutions are being placed before the members for their approval. The directors of your Company are also pleased to inform that Sarvashri S. Swaminathan and Major Gen. (Retd.) H.K. Kalra were appointed as alternate directors to Sarvashri Gian Singh and D.S. Basi respectively, with effect from 27th March, 2002. They will hold the office till the expiry of the term of the original directors or till the original directors come to India. Sarvashn V.K. Verma, Gian Singh and P.A. Kapur, directors of the company retire by rotation, and being eligible, offer themselves for re- appointment. Your directors recommend their re-appointment. Shri K.S. Soharu has decided to discontinue his services with the company. He is due for retirement by rotation and eligible for re-appointment but he has not offered himself for the same. The board places on record his long outstanding services to the company. Auditors & Their Report: The auditors M/s. V. Sankar Aiyar & Co. Chartered Accountants, retire at the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. As regards the audit observations, the same have been explained fully in the notes to present accounts and in the opinion of the board, no further information or explanations are required. Particulars of Specified Employees: As no employee was in receipt of remuneration exceeding Rupees twenty four lacs per annum or Rupees two lacs per month, during the relevant financial year, the requirement of Section 217(2A) of the Companies Act, 1956 is not applicable. Conservation of Energy, Technology Absorption: There is no specific information to report with regard to the disclosure of particulars of conservation of energy and technology absorption as the company is not covered by the rules prescribed in this behalf. However, it may be mentioned that the company has taken up the work of construction of ballastless track, which is a new technology being introduced in India, in Jammu-Udhampur section of Northern Railway. Foreign Exchange Earnings and Outgo: The details of foreign currency earnings and outgo are given in Note No. 19(a) (b) & (c) of Schedule-'L' to the statement of Accounts. Directors' Responsibility Statement: Pursuant to the requirement u/s. 217 2AA of the Companies Act, 1956, it is hereby confirmed:- (i) That in the preparation of accounts for the financial year ended 31st March 2002, the applicable accounting standards have been followed except where otherwise explained in the notes on accounts. (ii) That 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 at the end of the financial year and the profit & loss of the company for the year under review; (iii) That 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 (v) That the directors have prepared the accounts for the financial year ended 31st March 2002, on a 'going concern' basis. Report on Corporate Governance: Pursuant to Clause 49 of the Listing Agreements the following form part of this Annual Report, which are enclosed separately: (a) Management discussion and analysis; (b) Report on corporate governance; (c) Auditors' Certificate on Compliance of conditions of corporate Governance. Acknowledgement: The board of directors place on record and express their grateful appreciation and thanks for the assistance, corporation, guidance and support received from the Clients, Central and State Governments, Semi Government Organizations, Financial Institutions, Bankers, other Agencies and Business Associates. Your directors also wish to place on record their sincere appreciation for the dedicated efforts of the executives, staff and workers of the company in carrying out the business of the Company. Your directors thank the members for the patronage and confidence in the company. For and on behalf of the Board New Delhi O.P. Chadha Chander Verma August 05, 2002 Director Managing Director MANAGEMENT DISCUSSION & ANALYSIS Financial & Operational Performance: Despite all the challenges, the gross income for the year under review amounted to Rs.1170.16 millions as against Rs.651 16 million in the previous year, registering an increase of 79.70% (previous year (-) 6.60%). The profit before tax for the year amounted to Rs.186.36 millions against Rs.44.15 million in the previous year, resigning an increase of 322.11% (previous year (-) 0.47%). Such increase is mainly because the company was able to realize partly the dues in respect of Iraq/Libyan projects which were outstanding for a long time. Segment wise performance: The management has identified only one segment applicable in case of the company i.e. Civil Construction. However, the individual detail, of status of each projects under the sole-segment has already been mentioned in the director's report. Industry Structure & Development: Construction industry is facing rough competition in the global scenario due to presence of many leading players in the industry Since the government has begun stimulating infrastructure development in the fields of power roads & railways, the future for construction companies like ours seems bright. The company has been recently awarded five new projects valuing Rs.3358.70 millions. Business Outlook and Strategy: The recessionary trend in the global economy was also felt by the Indian economy especially in the construction industry. But now the economy has started looking up and the Government is allocating more funds for infrastructure development with the result it is quite likely that your company would get additional works for sustained growth. The strategy of the company is to achieve and sustains its reputation for excellence in the domestic and international construction markets. Its endeavour shall be to satisfy the customer's needs by executing the works to consistently high quality standards at competitive prices and within the timeframe agreed to. The company is committed to continually improve the effectiveness of Quality Management System by adopting the latest advances in technology and further by employee motivation and empowerment. The company has a learn of professionals who have distinguished experience in various construction activities and are abreast with the latest technologies available in the construction industry, the world over. Opportunities: The company keeps on exploring new opportunities in diversified construction activities. The company is looking forward to bid for turnkey hydroelectric projects in Madhya Pradesh and Arunachal Pradesh. The company is also bidding for construction of underground stage of LPG gas in Visakhapatnam (Andhra Pradesh). This is a new construction field being taken up in the country for the first tune. After a long break the company is again exploring new projects overseas by participating globally. Risks & Concerns: For greater participation in diversified fields, the company requires more banking support including enhanced non-funded bank guarantee limits. The risks and concerns are inherent in the construction industry and sound risk management is critical to the company's success. The company continued to Implement policy and procedures to identify, monitor and manage risks. The major risks involved in the construction industry are delay in payment by the client, delay in decision making and site related/geological risks. Efforts are always made to minimize and overcome the same. Internal Control System & Adequacy: The Company has engaged an independent firm of Chartered accountants, who conduct regular audits in various departments/projects/units of the Company. The Internal Auditors report their findings and observations to the audit committee which met four times during the year, to review the audit observations and to follow up implementation of corrective action. The Audit Committee also consults the Company's statutory auditors to ascertain their views on the adequacy of the internal control systems in the Company. Human Resources: Your Company firmly believes that man power is the most vital resource in giving the company a competitive edge in the current business environment, particularly in the construction industry, where large work force is required. The company at the year end, (including joint venture) had 2271 employees on its rolls and about 3162 persons through sob-contractors. industrial relations have remained cordial during the year. The Company has developed in-house Training centre for the development of knowledge, skills and competencies to build a motivated work force, in an endeavor to ensure staying ahead and achieving better results.