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Coromandel International Ltd - Directors' Report

BSE   23 Apr 14 | 12:00 AM

220.80 2.95 (1.35%)
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Code: 506395
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NSE   23 Apr 14 | 12:00 AM

221.05 1.9 (0.87%)
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Code: COROMANDEL
Performance
1 Week : Rs 218.90 (0.87%)
1 Month : Rs 210.90 (4.69%)
1 Year : Rs 186.35 (18.49%)
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DIRECTORS





The Board of Directors have pleasure in presenting the highlights of the performance of your Company together with the Audited Accounts for the Financial Year ended March 31, 2013.

Summary of Financial Results:

2012-13 2011-12
Revenue:
From Operations 8560 9,823
Other 67 117
Total Revenue 8627 9,940
Profit:
Profit before Interest,
Depreciation and Taxation 802 1,178
Less: Interest 177 117
Depreciation 59 56
Profit Before Exceptional Items & Tax 566 1005
Exceptional Item - (35)
Profit Before Tax 566 970
Less: Provision for Tax (including deferred tax credit) 122 277
Profit After Tax 444 693
Add: Surplus brought forward 481 318
Amount available for appropriation 925 1011
Appropriations:
Transferred to debenture redemption reserve 25
Transferred to general reserve 250 300
Interim dividend [includes Rs 7 lakhs on final dividend for 2011-12 ( Rs 5 lakhs on final dividend for 2010-11)] * 113
Proposed dividend 127 85
Dividend distribution tax 22 32
Surplus carried to the Balance Sheet 501 481

*Less than Rs 1 crore

Operations

The year gone by was a very eventful one with a strategic acquisition of Liberty Phosphate Limited, market leader in SSP segment, on the one side and a steep decline in demand for P & K fertilisers on the other side. Demand contraction was driven by near drought conditions in key addressable market states of Andhra Pradesh, Karnataka and Maharashtra and steep increase in P & K fertilisers prices due to rupee depreciation. A very high disparity between Urea and Phosphates prices also impacted the demand for phosphatic fertilisers. These factors impacted sales volumes of the Company during the year, which in turn impacted adversely profitability of the Company for the year under review. The Company had under the adverse conditions, improved its market share in the primary markets and recorded a total revenue of Rs 8627 crore. Profit for the year before depreciation, interest and taxation was Rs 802 crore and profit after tax was Rs 444 crore. Your Company also improved the financial performance of Sabero Organics Gujarat Limited (Sabero) with company turning in EBIDTA of Rs 50.80 crore as against ( Rs 34.36) crore in the previous year.

Deficient monsoon during the year impacted other businesses as well viz., Crop Protection and Speciality Nutrients. With the acquisition of Sabero, Crop Protection business has expanded its product portfolio and increased the share of global business. The main thrust during the year was to integrate Sabero operations with the Company`s business and enhance its presence in both domestic and global markets. These efforts have started yielding positive results with the formulations business registering a sales growth of 16% over the previous year. The business successfully redeployed the manufacturing capacity of Endosulfan plant to produce alternate products.

In Speciality Nutrient Business, while the adverse monsoon had impacted sulphur volumes, sale of Water Soluble Fertilisers registered a growth of 14%. In line with the overall strategy to enhance the Speciality Nutrients business the Company has adopted crop based approach for demand creation and also put in place dedicated sales force to improve the performance. Organic Manure business, despite adverse market conditions registered volume growth of 12%. The Company would continue to drive this business in helping the farmer to improve soil fertility.

Retail business, despite low off take of fertilisers, reported a 26% growth in non fertiliser products and the Company continues to focus on expanding its product portfolio. There are 550 outlets in the state of Andhra Pradesh and 96 outlets in Karnataka. The retail outlets have become the face of the Company and has helped in the increased sales of Pesticides and Speciality Nutrients. The Company`s efforts are directed towards making these retail outlets a complete farm solution platform.

Subsidiary Companies:

Acquisition of Liberty Phosphate Limited and Liberty Urvarak Limited (Liberty group)

During the year, your Company entered into a Share Purchase Agreement with the erstwhile promoters of Liberty group and acquired 70,19,406 equity shares (representing 48.62%) of Liberty Phosphate Limited (LPL) at Rs 241/- per share. Consequent to this on March 7, 2013 the Company reconstituted the Board of LPL and took control of the management of LPL.

The Company, also made a public announcement to further acquire 37,53,933 equity shares (26%) of LPL through an Open Offer from the shareholders of LPL at a price of Rs 241/- per share, pursuant to the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011. Approval of SEBI is awaited for completing the process of the open offer.

Your Company also acquired 100% equity shares of Liberty Urvarak Limited (LUL) from its shareholders. LUL has a manufacturing unit in Nimrani in the state of Madhya Pradesh. LUL holds 7,22,928 equity shares (representing 5%) of LPL. Your Company along with LUL holds 77,42,334 equity shares (representing 53.62%) of LPL. With completion of the abovesaid acquisition, both LPL and LUL have become subsidiaries of Coromandel.

LPL and LUL manufacture Single Super Phosphate (SSP) grade fertilisers with 5 manufacturing facilities spread across the States of Gujarat, Madhya Pradesh, Rajasthan and Uttar Pradesh. The shares of LPL are listed on the Bombay Stock Exchange.

Your Company had also signed a term sheet with the M/s Tungabhadra Fertilisers and Chemicals Company Limited (TFCL) for buying its business undertaking on slump sale basis.

The acquisition of LPL, LUL and proposed acquisition of the business undertaking of TFCL would make your Company a pan India Company and also would make the Company a formidable and leading player in SSP segment.

Despite adverse market conditions and deficient monsoon, LPL`s total revenue for the year ended March 31, 2013 was Rs 469.65 crore with a Net profit of Rs 32.05 crore.

LUL`s total revenue for the year ended March 31, 2013 was Rs 90.76 crore with a Net profit of Rs 5.37 crore.

In view of these acquisitions, your Company has deferred the setting up of SSP plant at Bhatinda, Punjab for the present.

Sabero Organics Gujarat Limited (Sabero)

Sabero`s total revenue for the year ended March 31, 2013 was Rs 515.78 crore with a Net profit of Rs 7.73 crore as compared to a loss of Rs 61.24 crore in the previous year.

CFL Mauritius Limited:

The company (a 100% subsidiary) earned a total revenue of US $ 0.49 million (equivalent to Rs 2.65 crore) and net profit of US $ 0.09 million (equivalent to Rs 0.48 crore) during the year ended December 31, 2012.

Parry Chemicals Limited (PCL):

The company (a 100% subsidiary) earned a total revenue of Rs 0.87 crore for the year ended March 31, 2013 and Profit after Tax was Rs 0.36 crore.

PCL, during the year had acquired 100000 equity shares of Sabero Organics Gujarat Limited representing 0.295% from the stock market.

Coromandel Brasil Limitada:

The Limited Liability Partnership in Brazil incurred net loss of Brazilian Reals 0.45 million (equivalent to Rs 1.21 crore) for the year ended December 31, 2012. Your Company had during the year made a further investment of Rs 0.89 crore in this company.

Joint Venture Companies

Tunisian Indian Fertilizers S.A. (TIFERT)

TIFERT, a joint venture company, was formed in Tunisia in 2008, to set up a phosphoric acid plant. The plant which was originally expected to be commissioned by the first quarter of 2011 got delayed mainly due to the political developments in Tunisia in the last two years. With the restoration of near normalcy in Tunisia the plant has been commissioned and is in the process of being stabilized and the phosphoric acid supplies are expected to commence during the current financial year onwards. Your Company during the year had given a loan of US $ 4.65 million to TIFERT to part fund the cost overrun of the project. Your Company`s strategic investment towards 15% equity stake in TIFERT is aimed at securing uninterrupted supply of phosphoric acid for the Company`s operations especially for the expanded capacity in Kakinada.

Coromandel Getax Phosphates Pte Ltd

The joint venture Company based in Singapore formed for leveraging opportunities for rock phosphate mining/sourcing continued scouting for opportunities during the year.

Coromandel SQM (India) Pvt Ltd.

The joint venture company formed to set up a Water Soluble Fertilisers (WSF) Plant at Kakinada, Andhra Pradesh, has commenced its operations during the year 2011-12. The company earned a total revenue of Rs 36.96 crore for the year ended March 31, 2013 and a Net profit of Rs 1.61 crore.

Strategic Investment

Foskor (Pty) Limited (South Africa):

The relationship with Foskor continues to be beneficial to both the companies and ensures sourcing of critical raw material i.e., phosphoric acid. Coromandel along with CFL Mauritius Limited holds 14% equity of Foskor (Pty) Limited.

Investment in Andhra Pradesh Gas Power Corporation Limited (APGPCL)

The Company has acquired additional equity in APGPCL entitling it to draw power equivalent to 15.12 MW. With the existing holding of shares equivalent to 5 MW, the total entitlement stands increased to 20.12 MW. The acquisition of additional shares in APGPCL would ensure regular power supply (at low cost) which would ensure smooth operations at Visakhapatnam and Kakinada plants.

Expansion Projects

Your Company has successfully commissioned and commenced production from the new third Complex granulation train at Kakinada plant at a total cost of Rs 337 crore. As part of this expansion, your Company also completed building storage tanks and other support facilities to augment infrastructure for the expanded capacities. With the commissioning of this plant, your Company has established facilities to produce up to 3.6 million MT of phosphatic fertilisers.

Safety, Health and Environment (SHE)

Company`s focus on Safety, Health and Environment continued during the year under review across all locations with all manufacturing plants maintaining high safety standards. Company has put in place robust processes and performance indicators to track its SHE performance. There was a significant reduction in reportable incidents during the year. Your Company maintained high standards of environmental performances with all facilities operating well within norms. Your Company continued its efforts to track health indicators of all its operating staff working in critical areas through its occupational health centres at its factories.

Special focused drive on structural safety started at Ennore and Visakhapatnam, will continue to improve the structural integrity. Decommissioning of the ammonia storage terminal at Visakhapatnam was completed successfully and replacement of undersea ammonia pipe line at Ennore was carried out to sustain the mechanical integrity of critical operations. Increased emphasis was laid on contractor safety training, performance monitoring, continuous communication and initiation of a reward mechanism resulting in healthy plant safety environment.

All the plants continued to make significant progress in attaining external SHE recognition, and have been certified with ISO 14001 Environmental Management System certification and conforms to Process Safety Management System. DuPont safety management evaluation assessment was carried out and the action plan workshop is in progress. The overall safety environment continued to improve during the year under review.

Dividend

Your Directors recommend a Dividend of Rs 4.50/- per equity share.

Bonus Debentures

In order to commemorate the golden jubilee of the Company and to reward the shareholders for their continued support, the Board of Directors allotted on July 23, 2012, one 9% Unsecured

Redeemable Non-convertible Fully Paid up Bonus Debenture of Rs 15/- each for every equity share by appropriating the General Reserve through a Scheme of Arrangement. The Debentures are redeemable in three equal installments, the first installment commencing from July 2014. The Company has an option to redeem the debentures prior to its maturity.

Consolidated Financial Results

Consolidated Financial Statements incorporating the operations of the Company, its subsidiaries and Joint Venture Companies is appended.

The Ministry of Corporate Affairs, has given a general exemption to companies from publishing the Annual Report of its subsidiary companies wherever a Consolidated Statement has been appended. In view of this, the Annual Report of the subsidiary companies, i.e. Parry Chemicals Limited and its subsidiary Dare Investments Limited, Sabero Organics Gujarat Limited and its subsidiaries, Liberty Phosphate Limited and its subsidiary Liberty Pesticides and Fertilisers Limited, Liberty Urvarak Limited, CFL Mauritius Limited and Coromandel Brasil Limitada have not been annexed.

However, the accounts of the subsidiary companies and the related information will be made available to the Members of Coromandel International Limited and its subsidiary companies on request and will also be kept for inspection at the Registered Office of the Company.

Awards/Recognition

Your Company continues to receive numerous awards/accolades from industry associations. During the year the Company received the following awards/accolades:

• Company was awarded Significant Achievement in the CII-EXIM Bank Business Excellence Award 2012 and Significant Achievement in HR Excellence Award 2012.

• Company received Institute of Directors Golden Peacock National Training Award for the year 2013.

• Company was awarded `Retail Marketing Campaign of the Year award` under Awards for Retail Excellence presented by ET Now.

Management Discussion & Analysis and Corporate Governance

The Management Discussion and Analysis Report highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this report.

As per the requirements of the Listing Agreement with Stock Exchanges, a report on Corporate Governance duly audited is annexed for information of the Members.

Directors

In accordance with Article 121 of the Company`s Articles of Association, read with Sections 255, 256 and 262 of the Companies Act, 1956, Mr A Vellayan, Mrs Ranjana Kumar and Mr K Balasubramanian are retiring at the ensuing Annual General Meeting. Mr A Vellayan and Mrs Ranjana Kumar, being eligible, offer themselves for re-appointment. Mr K Balasubramanian expressed his desire to retire at the ensuing Annual General Meeting. The Board places on record its sincere appreciation of the services rendered by Mr K Balasubramanian during his tenure of directorship.

The Board of Directors appointed Mr Uday Chander Khanna as an Additional Director effective July 23, 2012. The Company has received notice from a Member proposing his nomination for Directorship.

Auditors

M/s Deloitte Haskins & Sells, Chartered Accountants, Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. Members are requested to appoint the Auditors and fix their remuneration.

Cost Auditors

In pursuance of Section 233B of the Companies Act, 1956 the Central Government has ordered Cost Audit for Fertilisers and Insecticides products. Accordingly, Mr. V Kalyanaraman and Mr. Dantu Mitra, Cost Accountants, were appointed Cost Auditors to render reports to the Central Government. The Reports for the year 2011-12 were submitted on December 31, 2012 (due date February 15, 2013) and for the year 2012-13 the reports will be submitted on or before the due date.

Disclosures

Additional information on conservation of energy, technology absorption and foreign exchange earnings/outgo, as required to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is annexed hereto and forms part of this report.

In accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 and the Companies (Particulars of Employees) Amendment Rules, 2011, the name and other particulars are set out in the annexure to the Directors` Report.

As required under Section 217 (2AA) of the Companies Act, 1956, Directors’ Responsibility Statement is annexed hereto and forms part of this report.

The disclosures as required under Clause 12 of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 are annexed to this report for information of the Members.

Acknowledgement

The Directors acknowledge and would like to place on record the commitment and dedication on the part of the employees of your Company for their continued efforts in achieving good results, in an adverse situation.

The Directors also wish to acknowledge and record their appreciation of the continued support and assistance received by the Company from State Bank of India and other Banks, financial institutions, mutual funds, as well as from various Government bodies both at the Centre and the State.

On behalf of the Board
Place : Hyderabad A Vellayan
Date : April 23, 2013 Chairman
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