MANAGEMENT DISCUSSION AND ANALYSIS (1) Forward Looking Statements The report contains forward-looking statements, identified by words like 'plans', 'expects', 'will', 'anticipates', 'believes', 'intends', 'projects', 'estimates' and so on. All statements that address expectations or projections about the future, but not limited to the Company's strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Since these are based on certain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realised. The Company's actual results, performance or achievements could thus differ from those projected in any forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events. (2) Economy and Outlook Growth across the global economy continued to be tepid at 2.60% (2.50% in 2013), driven by varying trends across economies. The US, UK, Germany, and France (all Emmbi's focus markets) continued to show improvements, both on account of better labour market conditions, and easy monetary policies. Japan, China and other parts of Asia witnessed slower growth, and the oil exporting countries after years of consolidation, experienced declines due to the sudden drop in prices of hydrocarbons from June 2014. Global trade grew during the same period at less than 4.00%, well below the br-financial crisis level of 7.00% on account of lower import demand in high-income countries and structural adjustments. The outlook is expected to be divergent in the coming years, with the developed economies, showing improved prospects on account of recovery in labour markets, fiscal consolidation, and the low interest rate scenario. The oil exporting economies, are expected to witness significant slowdown, however the capital buffers that most of these economies possess, and their targeted spending plan should offset the negative impact to some extent. Emerging economies, especially the oil importers should benefit from the low prices of hydrocarbons, as it would reduce inflationary brssures, and fiscal imbalances. Indian economy witnessed higher levels of growth at around 6.00% after stagnating at sub 5.00% levels the past two fiscals. The core industrial sectors of mining, manufacturing, and power witnessed a pick-up in activities. The growth in the manufacturing sector was lower than what was ideal, both on account of subdued demand, and lower capital commitments as the industry perhaps waited for more positive policies from the government, prior to committing to investments. Services sector continued to imbrss with its growth, and despite erratic monsoons, there was improvement in the agricultural sector. Unfortunately the agri-sector continues to depend on monsoon as a large part of it is rain-fed, and any variation from historical pattern, can affect its output. The outlook for India continues to be positive, with inflation in check, we could anticipate a gradual decline in interest rates, which has been a hurdle for capital investments. Moreover if oil prices remain at current levels, it may also spur up private consumption besides helping the government manage subsidies, and reduce the deficit improving prospects moving forward. The governmental agenda of the "Make in India" should be a growth booster to the manufacturing sector, and bring positive structural changes to the economy. Manufacturing which currently contributes to 16% of India's GDP, under this scheme is expected to grow to an ambitious 25%. Given such a scenario it is expected that manufacturing sector would double itself every three years. For this to translate into reality, large-scale improvements and investments are required both at the infrastructure, and industry levels. Moreover the government is also expected to ease certain norms, allow incentives, and rationalise taxation to achieve this goal. Risks remain at local, and the global level; events in the Euro area, Russia or a political turmoil could affect not only projected growth, but also currency, and lead to flight of capital. (3) Sector Performance The Polymer sector in India is valued at $30 billion, and this grew at 8% last year, and, growth rate is pegged at 10% for the coming year. India is steadily gaining a foothold in the global market, as China no longer offers the same cost and other advantages. Technical textiles, which are essentially fabric woven out of polymers has been experiencing a healthy growth in the region of 15% upwards for the past five years. Traditionally North America, and Europe were the mainstay markets, however this is changing with increased demand from Asia, on account of greater consumption needs. Emmbi is expected to grow at a much faster rate compared to the industry. (4) Emmbi Industries International and Domestic Business Product Range Since the commencement of operations two decades ago, today we are proud to say that we have over 30 products that caters to a client base of over 200. International Business Exports surpassed the magical Rs. 1billion mark, driven by both volumes, as well as values. We export to over 51 countries, and across a spectrum of industries ranging from highway construction to disposal of hazardous nuclear waste. Today we are setting up operations in Scandinavia to cater to the larger European markets. It is our goal to strengthen our distribution capabilities and cement our relationship with clients by being closer to them. Domestic Business The investments in R&D consciously made in the prior years have not only paid off from a growth perspective, but has helped us move towards value added products. Emmbi is a pioneer in not only speciality packaging material that finds users in e-tailers, retailers, and wholesalers, but importantly a first mover in the water conservation segment. Our canal-lining project has been a resounding success we anticipate this segment to contribute significantly to revenues, and handsomely to margins. We have been the first in India, to design, and manufacture crop covers that provide protection against hail storms. We acknowledge that rural India would be one of the engines for growth in the years to come. In the past we designed products such as aqua save, and collapsible water tanks designed for storage and transportation that were uniquely positioned to this market from both a pricing, and packaging perspective. We are now building channel partners, and investing in a distribution network so that we are the frontrunner in this segment as well. (5) Emmbi's Operations Plant Capacity and Utilisation Capacity at 68% has registered a growth of 31% over the past three years, and we expect a gradual pick-up and full utilisation in another three years down the line. This would also translate into better margins in the next three years. Record Earnings We continued to imbrss both in terms of revenues, and earnings to shareholders. The company recorded an imbrssive top line growth in revenues to Rs. 1,929 million and a record profit of Rs. 59.65 million. Quality and Adherence We adhere to the latest international standards, and believe in adapting the best practices in the industry, be it people, processes, quality of our products or internal systems. We are in the process of "Integrated Management System"(IMS) a customised combination of ISO 9001 & OSAHAS 18000 and ISO 14000. This is in addition to the certification of ISO 9001:2008 that your company possess. People and Processes We continue in investing and developing existing talent, and source human resources when needed. This year we conducted workshops on both technical, and soft skills, with the help of internally created teams, and external experts. We have initiated "Lean Enterprise Management Programme" which we believe would reduce costs on a sustainable basis. We have engaged one of the big four accounting firms to frame a 'Whistle Blower' policy keeping in check with the best practices (Detailed in the Corporate Governance Section). It is the cohesive fabric that the employees as a combined family at Emmbi weave that has brought you such excellent results. Information Technology We have commenced the process of integrating our plants located at five different locations and the corporate office in Mumbai, through an integrated ERP Platform. We believe in addition to providing timely reports this would reduce costs, and aid us immensely in managerial decision making. Research & Department The company's policy of continuous innovation, and investing in home-grown research over the years, has not only translated to tangible benefits, but has importantly made it eligible for being recognised as a full fledged R&D Development centre by the Government of India. We expect this to be carried out over the next 12 months (7) Cautionary Statement The estimation and expectation made in this report may differ from actual performance due to extraneous factors such as economic conditions, governmental policies, regulations, and other factors. For & On Behalf of the Board of Directors Makrand Appalwar Chairman & Managing Director DIN: 00171950 Place: Mumbai Date: 28th May, 2015 |