Companies & Industry »Directors' Report
Coromandel International Ltd - Directors' Report

BSE   30 Sep 14 | 12:00 AM

305.35 -9.05 (-2.88%)
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Code: 506395
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305.85 -9.95 (-3.15%)
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Code: COROMANDEL
Performance
1 Week : Rs 319.65 (-4.47%)
1 Month : Rs 258.50 (18.12%)
1 Year : Rs 232.50 (31.33%)
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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 31st March 2014.

SUMMARY OF FINANCIAL RESULTS

Rs. in crore
2013-14 2012-13
Revenue:
From Operations 9381 8560
Other 61 67
Total Revenue 9442 8627
Profit:
Profit before Interest, Depreciation and Taxation 800 802
Less: Interest 211 177
Depreciation 82 59
Profit Before Exceptional Items & Tax 507 566
Exceptional Item 13 -
Profit Before Tax 494 566
Less: Provision for Tax (including deferred tax credit) 149 122
Profit After Tax 345 444

The results for the current year include results of erstwhile Liberty Phosphate Limited (LPL) and erstwhile Liberty Urvarak Limited (LUL), which have been amalgamated with your Company with effect from 1st April 2013, pursuant to a Scheme of Amalgamation approved by the Hon’ble High Courts of Andhra Pradesh and Gujarat.

Operations

The south-west monsoon in 2013-14 was one of the best experienced in recent years and positively influenced Kharif sowing and output. Your Company leveraged the favourable monsoon conditions and its complete portfolio of agri-inputs comprising of fertilisers, crop protection and specialty nutrients to register robust growth. Further, your Company has expanded its retail footprint in Andhra Pradesh and Karnataka and improved its performance by growing the non-fertiliser segment thereby registering profitable growth over previous year.

The consumption levels of P&K fertilisers which had declined to historic lows in 2012-13 recovered in 2013-14 due to increased sowing, good monsoon and improved groundwater conditions. This has helped the industry to reduce the pipeline inventory significantly.

Your Company also reduced its inventory of finished products, improved collections and increased its sales volume resulting in an increase in market share. In addition, your Company maintained tight controls on conversion costs and fixed costs and effectively managed phosphoric acid availability to improve capacity utilization. The new production stream, C-train at Kakinada produced various grades of complex fertilisers and DAP. Higher working capital due to pipeline inventory and receivables has impacted the overall financing costs and focused efforts helped in easing the position considerably in the current year.

During the year, your Company pursuant to the Scheme of Amalgamation approved by the Hon’ble High Courts of Andhra Pradesh and Gujarat, has completed the transfer of the entire business undertaking of LPL and LUL, including all its assets and liabilities effective 1st April 2013. Your Company has also acquired the business undertaking from M/s Tungabhadra Fertilisers and Chemicals Company Limited (TFCCL) on a slump sale basis. With the addition of LPL and LUL manufacturing facilities in the northern and western parts of India and the associated marketing network, your Company will be able to leverage the combined marketing network to increase the sale of phosphatics and Single Super Phosphate (SSP). In the year 2013-14 the excessive field stock of SSP inventory and high input cost of raw materials have impacted performance of SSP operations.

During the year the Crop Protection business recorded strong growth over previous years by leveraging its domestic distribution network and its direct presence in key Latin America and Asia Pacific markets. The Company has added to its portfolio of export registrations and initiated a regional focus approach with a view to expand its overseas presence. Domestic formulations business benefitted from demand arising out of increased sowing of critical crops like paddy, cotton and pulses. To create a new identity and to present the farmers with a stronger value proposition, the Company launched a new umbrella brand "Gromor Suraksha". The business also improved its production efficiencies at its technical manufacturing locations and completed various projects that have improved the overall product quality, safety and plant reliability. With the proposed merger of Company’s subsidiary Sabero Organics Gujarat Limited, the crop protection SBU is poised for growth leveraging domestic market network and global presence.

Specialty Nutrients business has registered a healthy growth in all three product categories – Water Soluble Fertilisers (WSF), Sulphur Products and Micro Nutrients. Your Company is the market leader in Water Soluble Fertilisers and Sulphur product segments. During the year, six new products were introduced to offer need based crop solutions and the business is focused on achieving scale by adopting a crop based approach to sales and marketing efforts.

The Retail business completed a series of new initiatives and robust processes in the year 2013-14 to facilitate long term growth. The business focused on positioning every outlet as a "Complete Farming Solution" platform through range expansion in the Non-Fertilisers segments. These initiatives have resulted in Retail registering a significant growth during the year.

The Company has recorded a total revenue of Rs. 9442 crore. Profit for the year before depreciation, interest and taxation was Rs. 800 crore and Profit before tax was Rs. 494 crore. Net Profit after tax was Rs. 345 crore.

Subsidiary Companies:

Sabero Organics Gujarat Limited (Sabero)

Sabero’s total revenue for the year ended 31st March 2014 was Rs. 721.43 crore with a Net profit of Rs. 33.13 crore as compared to a profit of Rs. 7.73 crore in the previous year.

During the year the Boards of your Company and Sabero have approved a Scheme of Amalgamation for merger of Sabero with the Company, subject to approval of the respective shareholders, creditors, concerned High Courts and such other authorities, as may be required. The Scheme will be with effect from 1st April 2014 but would become operative after receipt of necessary approvals. Meetings of the shareholders and creditors of the Company and Sabero are scheduled to be held on 16th June 2014 and 20th June 2014, respectively.

CFLMauritius Limited:

The Company (a 100% subsidiary) incurred loss of US $ 0.18 million (equivalent to Rs. 1.07 crore) during the year ended 31st December 2013. Primary source of income for this subsidiary is dividend income from Foskor (Pty) Ltd. and during the year, the subsidiary did not receive any dividend from Foskor. Your Company has during the year made a further investment of Rs. 25.07 crore in this company.

Parry Chemicals Limited (PCL):

The Company (a 100% subsidiary) earned a total revenue of Rs. 3.32 crore for the year ended 31st March 2014 and Profit after Tax was Rs. 2.91 crore.

PCL, during the year had sold 558249 equity shares of Sabero Organics Gujarat Limited (Sabero) representing 1.65% of the equity capital of Sabero to its holding company, Coromandel.

Dare Investments Limited (DIL):

During the year Dare Investments Limited, which was a wholly owned subsidiary of PCL, has become a direct subsidiary of the Company. Your Company had during the year made a further investment of Rs. 4.95 crore in this company.

Coromandel Brasil Limitada:

The Limited Liability Partnership is primarily engaged in getting product registrations in Brazil and procuring orders for supplies from India. It incurred net loss of Brazilian Reals 0.26 million (equivalent to Rs. 0.70 crore) for the year ended 31st December 2013.

Liberty Pesticides and Fertilisers Limited (LPFL):

During the year, LPFLwhich was a wholly owned subsidiary of LPL, has become a direct subsidiary of the Company and it did not have any significant operations during 2013-14.

Joint Venture Companies

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 earned a total income of Rs. 63.24 crore for the year ended 31st March 2014 and the net profit was Rs. 1.59 crore.

Strategic Investment

Tunisian Indian Fertilisers S.A. (TIFERT)

Company has a strategic investment of 15% equity stake in TIFERT, a company based in Tunisia, manufacturing phosphoric acid. With the restoration of near normalcy in Tunisia the plant was commissioned last year and your Company received phosphoric acid from TIFERT and the plant is getting stabilized. Your Company’s strategic investment in TIFERT is aimed at securing uninterrupted supply of phosphoric acid for the Company’s operations especially for expanded capacity at Kakinada.

Foskor (Pty) Limited (South Africa):

Coromandel along with CFLMauritius Limited holds 14% equity of Foskor (Pty) Limited. Coromandel continues to leverage its relationship with Foksor in sourcing phosphoric acid, the key raw material, for manufacturing 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.

Process safety focused on fertiliser plants and special drive carried out during annual turnaround time facilitated to address the process related ‘near miss’ incidents. Structural safety initiatives undertaken at Ennore and Visakhapatnam units will continue to improve the structural integrity. Increased emphasis laid on contractor safety training, performance monitoring, continuous communication and initiation of a reward mechanism resulted in healthy plant safety environment.

Action plan implemented based on DuPont safety management evaluation assessment will continue to strengthen the safety culture of the organisation. 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. The overall safety and environment continued to improve during the year.

Dividend

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

Bonus Debentures

28,28,17,658 9% Unsecured Redeemable Non-convertible fully paid Bonus Debentures of Rs. 15 each aggregating to Rs. 424 crores issued by the Company to the shareholders in July 2012 were to be redeemed in three annual installments from July 2014. The Company has fully redeemed these debentures in March 2014 by exercising its option of early redemption.

Consolidated Financial Results

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

The Ministry of Company Affairs, has given 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 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 in 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:

• ‘India’s Best Board - 2013’ Award, instituted by Economic Times and Hay Group.

• Dun & Bradstreet Corporate Awards 2012 - Top Indian company under the sector - fertilisers.

• FAI Award on application of Information and Communication Technology (ICT) in Agriculture -2013’. The award was given in recognition of the pioneering efforts involving ICT in agriculture initiated by the retail division while discharging farmer extension services.

• "Retailer of the Year Award" under Rural Impact & CSR category from Asia Retail Congress.

• First prize in State Energy Conservation from the Government of Andhra Pradesh for commendable efforts towards significant improvement in conservation of energy.

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 Directors’ 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 Section 152 of the Companies Act 2013 and the corresponding provisions in the Companies Act 1956, Mr V Ravichandran and Dr BVR Mohan Reddy are retiring at the ensuing Annual General Meeting. Mr V Ravichandran and Dr BVR Mohan Reddy, being eligible, offer themselves for re-appointment.

Dr J S Sarma, who was appointed as an Additional Director with effect from 8th August 2013 passed away on 28th February 2014. The Board places on record its sincere appreciation of the services rendered by Dr J S Sarma during his tenure of directorship.

The Board of Directors appointed Mr. Prasad Chandran as an Additional Director effective 18th April 2014. 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, Shri V Kalyanaraman and Shri Dantu Mitra, Cost Accountants, were appointed Cost Auditors to render reports to the Central Government. The Report for the year 2012-13 were submitted on 18th September 2013, before the due date and for the year 2013-14 the report 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 by 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: 12th May 2014 Chairman
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