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Wartsila India Ltd.

BSE: 500443 Sector: Engineering
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Wartsila India Ltd. (WARTSILA) - Director Report

Company director report

WARTSILA INDIA LIMITED ANNUAL REPORT 2009 DIRECTOR'S REPORT To The Members, The Directors have pleasure in presenting to you their twenty-fourth Annual Report and Audited Accounts for the accounting year ended 31st December, 2009. Performance of the Company The Company's performance for the year is summarised below: Financial Highlights (Rs. in million) Year ended 31st December, 2009 2008 Sales and Other Income 4566 3623 Profit before depreciation 699 520 Profit before tax 654 445 Profit after tax 488 331 Profit brought forward 1494 1263 1982 1594 Less: Transfer to General Reserve 49 33 Transfer to Maintenance Reserve 26 25 Proposed Dividend 36 36 Tax on Proposed Dividend 6 6 117 100 Balance carried forward 1865 1494 Dividend: The Directors have recommended dividend at 30% (Rs.3/- per share of Rs.10/- fully paid-up) for the year ended 31st December, 2009 subject to the approval of the shareholders at the Annual General Meeting. This entails a dividend payment of Rs. 36 million. Operations: The Company's turnover during the year 2009 increased to MINR 4566 being 26% more than the previous year while the profit after tax increased by 47% to MINR 488 primarily due to Services business achieving good results and effective control of operational costs. The Power Plant business picked up during the year 2009 as the delivery of power plants aggregated to 54 MW (35 MW last year). During the same period, capacity commissioned totalled 32 MW (50 MW last year). The cumulative deliveries of power plants to customers upto 31st December, 2009 aggregated to 3235 MW, of which 3201 MW have been commissioned and operating while 34 MW is under installation and likely to be commissioned during the year 2010. In addition, as on 31st December, 2009, orders totalling 60 MW (45 MW last year) were on hand for delivery and execution during the year 2010. The order intake during the year 2009 was 75 MW as compared to 57 MW in the year 2008. The Services business continued to do well. The Company's competency in re- locating power plants resulted in turnkey projects for the business. The foray in ship repairs gained momentum with propulsion activities in shipping segment. As of 31st December, 2009, the Company operates and maintains 54 power plant sites under contract covering 131 engines (669 MW), 10 steam turbine generators (STG-311.6 MW) and 22 wind turbine generators (WTG - 56.4 MW) totalling 1040 MW (compared to 52 power plants and 818 MW as of 31st December, 2008). The Company looks forward to steer its automation business into marine, industrial and power plant sectors. The Company's Ship Power business reflected the financial crisis in the shipping industry. The year 2009 saw few orders for shipbuilding at Indian shipyards. As a result, ship owners continued to hold or defer their investment decisions for expansion of capacities. The primary activity for much of the year was to re-negotiate deliveries along with rearrangement of the delivery schedules based on the revised plans and was focused on the strengthening internal systems and procedures and deliveries for the Indian Navy projects. The business situation is expected to continue to be challenging and the trend in 2010 is expected to be more or less the same. Industrial Operations at Khopoli plant is concentrating on expansion of Auxiliary manufacturing activities in the year 2010. Auxiliary production in the year 2009 was higher as compared to that in 2008. Sale of gear boxes and nozzles continued to be low due to the downturn in Shipping Industry. As reported last year, in view of the severe economic slowdown faced by the shipping industry, the expansion of manufacturing activities at Khopoli for Controlled Pitched Propellers (CPP) was discontinued. Consequently, an impairment of assets related to CPP plant and machinery to the tune of MINR 13 has been recognised in the books of accounts during the year. Reduction of Share Capital: A Special Resolution for reduction of Equity Share Capital was approved at the Extra-Ordinary General Meeting held on 10th November, 2009. A petition, in accordance with Sections 100 to 104 of the Companies Act, 1956, for reduction of share capital was filed with the Hon'ble High Court of Judicature at Bombay on 23rd November, 2009. The Company is awaiting the Hon'ble Court's approval in this regard. Subsequent to the confirmation of the Hon'ble High Court of Judicature at Bombay, the Issued, Subscribed and Paid-up Equity Share Capital of the Company will be reduced from Rs.12,03,40,000/-divided into 1,20,34,000 Equity Shares of Rs. 10/- each to Rs. 11,89,92,310/-divided into 1,18,99,231 Equity Shares of Rs. 10/- each, by cancellation of 1,34,769 Equity Shares of Rs. 10/- each held by the holders of the Equity Shares other than the Promoters. Coastal Wartsila Petroleum Private Limited (CWPL) - A 50:50 Joint Venture with Coastal Energy Resources Limited, Mauritius The voluntary winding-up of CWPL, which commenced in the year 2003, is in progress, pending finalisation of the statutory assessments and litigations. The carried over provisional loss (before tax) as on 31st December, 2009 is Rs. 16.15 million. Human Resources: Training during the year has been at an average of over 5.06 mandays per employee. The Company had 1147 employees at the end of the year 2009 as against 1087 at the end of year 2008. Transfer to Investor Education and Protection Fund: In compliance with Section 205C of the Companies Act, 1956, the Company has transferred a sum of Rs. 0.16 million during the year to the Investor Education and Protection Fund established by the Central Government. The said amount represents the unclaimed dividend pertaining to the year ended 31st December, 2001. Directors: In accordance with the provisions of the Articles of Association of the Company, Mr. Christoph Vitzthum retires by rotation at this Annual General Meeting and, being eligible, offers himself for re-election. Mr. Stefan Fant, who was appointed as a Director in casual vacancy caused upon resignation of Mr. Jaakko Eskola effective 8th April, 2009 holds office upto the date of forthcoming Annual General Meeting. A Resolution proposing his appointment will be placed before the Members for their approval. Auditors: M/s. S. B. Billimoria & Co., Chartered Accountants, Mumbai, the retiring Auditors of the Company have expressed their unwillingness to be re- appointed as the Auditors of the Company vide their letter dated 22nd March, 2010. The Board of Directors recommend the appointment of M/s. BSR & Associates, Chartered Accountants as the Statutory Auditors of the Company in place of M/s. S. B. Billimoria & Co., Chartered Accountants, from the conclusion of the ensuing Annual General Meeting till the conclusion of the next Annual General Meeting. M/s. BSR & Associates, Chartered Accountants have expressed their willingness to act as Auditors of the Company. Annexures 1. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgoings Particulars prescribed under Section 217(1) (e) of the Companies Act, 1956 are given in the Annexure 1 which forms part of this Report. 2. Directors' Responsibility Statement: Information as per Section 217(2AA) of the Companies Act, 1956 as amended, forms part of this Report and is given in the Annexure 2. 3. Particulars of Employees: Information as per Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report and is given in the Annexure 3. Acknowledgements: Your Directors wish to place on record their grateful appreciation for the excellent support and co-operation received from all stakeholders, Banks, Financial Institutions, Investors, Government Authorities, Stock Exchanges, Reserve Bank of India, Central and State Governments and Khopoli Municipal Corporation. The Directors also place on record and acknowledge the valuable guidance and support extended by the Wartsila Group. Your Directors also wish to place on record their deep appreciation of the dedication and contributions made by the management team and all the employees at all levels and look forward to their continued support in the future as well. For and on behalf of the Board of Directors Subodh Bhargava Chairman Mumbai: 22nd March, 2010 Annexures to the Report of the Directors 1. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgoings Information as per Section 217 (1) (e) read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended 31st December, 2009: Form for Disclosure of Particulars with respect to Conservation of Energy A. Power and Fuel Consumption 2009 2008 1. Electricity (a) Purchased Units (MWh) 952.81 945.73 Total Amount (Rs. in million) 5.16 4.71 Average Rate/KWh (Rs.) 5.41 4.98 (b) Own generation (i) Through diesel generator Units (MWh) 74.85 145.28 Diesel consumption (L) 23703 50805 Units per Itr. of diesel oil 3.16 2.93 Cost/unit 11.56 13.23 B. Consumption per Unit of Production Particulars EOU Non-EOU (Auxiliaries)* 2009 2008 2009 2008 Electricity consumption in KWh 3302 4839 2999 3500 C. Consumption per MINR of Sales Turnover Electricity consumption in KWh 1263 1372 1342 1665 * Includes consumption towards common facilities. Measures undertaken to conserve energy: Installation of 'Power Factor Controller' consisting of Capacitor banks for second distribution panel. - Installation of auto switch off timers to compressors. - A special drive on energy conservation enhancing alertness towards saving energy. Impact of the above Measures: The above measures have resulted in power saving with improved power factor, controlled voltage and reduction in maintenance cost. Form for Disclosure of Particulars with respect to Technology Absorption In close co-operation with Wartsila Group, the Company continues to receive the latest engineering designs for Power Plants and auxiliary equipment and these are absorbed on a continuing basis through discussions and training sessions. The Company's development of in-house engineering capabilities has equipped our teams for a meaningful understanding and absorption of state-of-the-art technological developments. High-speed diesel generator technology: 1. Efforts in brief made towards technology absorption, adaptation and innovation: Comprehensive training was provided to engineers for exposure to latest design, manufacturing techniques and new technological activities in high- speed diesel generator technology. 2. Benefits derived from above: - Facilitate engineers in execution of similar high-speed diesel projects - Improvement in Job knowledge - Development of new state-of-the-art product - Enhanced documentation and reduction in noise and vibration levels in machinery 3. Imported technology: Technology Year of Status imported import High speed diesel technology transfer 2005 Completed Foreign Exchange Earnings and Outgoings: (Rs. in million) 2009 2008 Earnings 1289 1291 Expenditure 1400 1082 2. Directors' Responsibility Statement: Directors' Responsibility Statement as required under Section 217(2AA) of the Companies Act, 1956 and forming part of the Directors' Report for the year ended 31st December, 2009: - That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; - That the Directors had selected such accounting policies and applied them consistently and made judgements 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 or loss of the Company for that period; - That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; - That the Directors had prepared the annual accounts on a going concern basis.