MANAGEMENT DISCUSSION AND ANALYSIS REPORT The Management Discussion and Analysis Report sets out developments in the business environment and the Company's performance. The analysis supplements the Board's report, which forms part of this Annual Report INDUSTRY STRUCTURE, DEVELOPMENTS AND OUTLOOK Zinc is an ancient metal with modern uses. India is a major recycling country. Zinc has imbrssive growth in production and consumption. Although zinc has a large number of applications, 2/3rd is being used for coating and galvanizing. The oxides market is just 5% and is for a huge growth with many new automobile tyre companies setting shops in India and the existing players expanding their capacities. Global zinc consumption is expected to grow steadily by 4-5% per annum in the coming years. Although the primary lead capacity remains static, the secondary lead demand is growing year by year and is expected to maintain the same trend in the coming year 2015-16. With the expected growth in automative and infrastructure market, the demand for lead acid batteries in both the said industries is set to grow in double digits as the lead oxides too have found good demand in 2014-15. Pipes and fittings account for 70% of PVC consumption in India. The demand for pipes and fittings is seasonal and depends on weather conditions as it is widely used in construction and agriculture. Rigid pipes accounts for 85% of all pipes. Due to greater emphasis on improving rural water supplies and agriculture irrigational projects, the demand for PVC pipes is set to grow. PVC profiles for door and window frames are developing as environmental concerns over deforestation is leading to discouragement of use of wood. Wire and cables account for 5% of PVC consumption and is driven by investment in infrastructure and construction projects. Other applications include medical products like blood bags and tubing, consumer goods like footwear, toys and flooring. Consumption of PVC is set to grow at close to 8% during the next two years. Government plans to invest about USD 1,000 Billion in the next two years in sectors like Power, Telecom, Roads, Ports and Aviation. These will certainly boost Telecom, Inverter UPS, Renewable Energy and PVC Pipes, Fittings and Profiles which will be highlighted for our core business and prospects. OPPORTUNITIES AND THREATS POEL believes that it has a competitive edge in the market as the Company delivers timely and quality products to its customers. The Company has long standing relationship with many of its customers and vendors. POEL also believes that the real strength of the Company lies with its employees and they are the assets of the Company. POEL suffers from threats like currency fluctuations as the Company has significant forex exposure. The prices of products in which the Company deals in are highly volatile. Lead and Zinc being commodity metals, volatility is the order of the day. The Company has put in proper hedging mechanism in place as a safeguard against the volatility risk. SEGMENT-WISE PERFORMANCE The business of the Company is structured into the following segments and their related performances are as follows: Metallic Oxides Segment have contributed almost 68% of the turnover of the Company. The Plastic Additives business contributes 5.28% to the profit of its turnover and remains to be the most profitable segment for the Company. The margin on Metallic Oxides business is 3.60% of its turnover. RISKS AND CONCERNS Risk is an integral factor in virtually all businesses. At POEL, risks are adequately measured, estimated and controlled. Irrespective of the type of risk or the activity that creates it, the Company's fundamental approach to risk management remains the same by identifying and measuring risks, leverage an in depth-knowledge of the business and competitors and respond flexibly in our risk understanding and management. Your Company operates both in the domestic market and overseas. Having its global brsence with import and export trade, we are subject to currency rate fluctuation which may result into gain or loss. In order to safeguard the business, your company does adopt hedging techniques to protect itself against currency fluctuations. Raw material availability and commodity price fluctuation also remains an area of concern. To overcome the fluctuation in metal prices, company fixes the selling price with major customers on average LME rate basis and accordingly purchase price is also hedged properly to minimize the risk in metal price fluctuation. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Your Company has an established system of internal controls for ensuring optimal utilization of various resources. Investment decisions involving capital expenditure are taken up only after due appraisal and review. Adequate policies have been laid down for approval and control of expenditure. Internal audit is carried out by a firm of Chartered Accountants to ensure adequacy of the internal control systems. The internal audit report is reviewed by the Audit Committee to ensure that all policies and procedures are adhered to and all statutory obligations are complied with. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE During the year under review, the Company's overall performance was good. The financial and operational performance for the year 2014-15 includes the performance of four Undertakings which were demerged into the Company during the year and therefore the current year performance is not comparable with that of the brvious year. On account of Demerger, significant changes have taken place in the Share Capital and Reserves & Surplus of the Company which has been explained in the Board's Report. Financial details are forming part of Board's Report under the heading "Financial Results". MATERIAL DEVLOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATIONS Your Company believes that its employees are the main force in driving performance and developing competitive advantage. On account of Demerger, the employees employed in the Demerged Undertakings have been transferred to the Company. POEL is maintaining good employer-employee relationship. The Company provides Medical Care and Canteen Facility to the employees. POEL also provides food allowances to all its employees working in its manufacturing plant. Technical and safety training programs were held to enhance workers' knowledge and application skills. As on March 31, 2015, the Company had permanent workforce of about 111 and contractual workforce of about 200. Industrial relations continued to remain cordial and harmonious during the year. CAUTIONARY STATEMENT Statements made herein describing the Company's expectations or brdictions are "forward-looking statements". The actual results may differ materially from those expected or brdicted depending on market conditions, input costs, economic development, Government policies and other incidental factors. For POCL Enterprises Limited Devakar Bansal Managing Director DIN: 00232565 Sunil Kumar Bansal Joint Managing Director DIN: 00232617 Place : Chennai Date : July 29, 2015 |