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THREATS (T)
1. Domestic CNG growth dependent on Government
policies and plans
The growth in CNG cylinder market for storage and
transportation of CNG would be dependent on government
plans and initiatives to switch over to alternative fuel.
However, with natural gas being made available in most
parts of the country and rising cost of fuels, it is expected
that the Government policies would continue to be
progressive favoring CNG as a fuel. This would lead to an
accelerated growth in the CNG cylinder industry.
2. Slowdown in the Indian automobile industry negatively
impacts the Company’s growth
OEMs and retrofitters are the major customers of EKC’s CNG
cylinders in the automobile sector. Any slowdown in cylinder
off take from OEMs in India will adversely affect EKC’s
operations / production plans. However, demand from other
global markets helped in offsetting the slowdown in the
Indian auto sector.
3. Volatile steel prices
Seamless steel tube (primary raw material) prices have
stabled in the year gone by thereby limiting the impact on
bottomline. EKC successfully unwound the high cost
inventory by end of Q1, 2010-11 and realigned its
procurement policies in order to ensure that the benefits of
lower procurement cost are achieved while at the same
time, inputs are available at the right time for operations.
4. Fluctuation in Foreign Currency
Since EKC has significant imports as well as exports, any
foreign currency fluctuations might affect the results or
performance of the Company.
There has been a marked change in the exchange rate
between INR and Euro and INR and USD in the recent
years and these currencies may continue to fluctuate
significantly in future as well. Accordingly, the Company’s
operating results have been and will continue to be impacted
by fluctuations in the exchange rate between the Indian
rupee and the Euro and the Indian rupee and the US dollar,
as well as exchange rates with other foreign currencies.
The Company’s treasury function actively tracks the
movements in foreign currencies and has an internal risk
management policy of proactively hedging exposures. As
per the internal guidelines, the Company has been
judiciously hedging its net exposures on regular basis
through forward cover contracts and Options.
EVEREST KANTO CYLINDER LIMITED
FINANCIAL PERFORMANCE VIS-A-VIS OPERATIONAL
PERFORMANCE
EKC has staged a smart recovery from the economic slowdown
across various geographies and delivered superior financial
performance during the year with significant improvement in
operating results as compared to the previous year. A number of
initiatives were taken during the year under review to further
consolidate its strengths and position itself to take advantage of
the upturn.
EKC managed to sell 884,339 cylinders during the year 2010-11
an increase of around 29% as compared to 687,212 cylinders
during the year 2009-10. During FY 05-06 to FY 10-11, sales of
total cylinders grew at a CAGR of 20%.
The consolidated turnover for the year increased by 20% from
Rs. 64,965 Lac to Rs. 77,634 Lac and the consolidated profit after
tax was at Rs. 7,051 Lac as against Rs. 4,151 Lac in the previous
year which is higher by 70%.
INTERNAL CONTROL SYSTEM
Your Company believes in formulating adequate and effective
internal control systems and implementing the same strictly to
ensure that assets and interests of the Company are safeguarded
and reliability of accounting data and accuracy are ensured with
proper checks and balances. The Internal control system is
improved and modified continuously to meet the changes in
business conditions, statutory and accounting requirements.
The Company has an internal audit function, which is empowered
to examine the adequacy and the compliance with policies, plans
and statutory requirements. It is also responsible for assessing
and improving the effectiveness of risk management, control and
governance process. The management of the Company duly
considers and takes appropriate action on the recommendations
made by the statutory auditors, internal auditors and the
independent Audit Committee of the Board of Directors.
The prevailing system of internal controls and internal audit are
considered to be adequate vis-a-vis the business requirements.
In order to further strengthen the internal control systems and
with a view to automate the various processes of the business,
EKC has implemented an Enterprise Wide Resource Planning
(ERP) system.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
EKC continued to place emphasis on human capital and aims at
creating a corporate culture that respects people, develops and
trains them to deliver high quality performance and rewards talent
and performance with growth opportunities.
As of 31st March, 2011, EKC and its subsidiaries had employed
approximately 1900 employees. This comprises of highly qualified
and experienced professionals from various fields like
engineering, finance and management. Employee Relations
continue to be cordial and harmonious.
Management Discussion & Analysis Annual Report 2010-11
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