2007-08 - Aditya Birla Nuvo, Ltd

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MANAGEMENT’S DISCUSSION AND ANALYSISVALUE BUSINESSESCARBON BLACKRs. Crores2007-08 2006-07 Change (%)Capacity (MTPA) 230,000 170,000 35%Production (MT) 215,103 182,668 18%Sales Volumes (MT) 214,617 180,893 19%Realisation (Rs./MT) 40,250 40,850 –1%Net Turnover 863.8 738.9 17%Operating Profit 152.6 132.2 15%PBIT 130.3 116.0 12%Capital Employed 667.5 487.2 37%ROACE (%) 23% 26% —Performance ReviewThe Carbon Black business has delivered a strong performance, supported by the continuing robust demandfrom the auto and tyre sector. Domestic demand for Carbon Black grew at about 13% year-on-year.The Carbon Black business of your Company is second largest producer in India. The business registered thehighest ever production and sales volumes, aided by the brownfield capacity expansion by 60,000 MT,completed in July 2007. The sales volumes at 214,617 MT were higher by 19% over the previous year. Exportsales volumes almost doubled. To keep the new capacity fully utilised, surplus volumes are being exported.Realisation remained flat due to cheaper CBFS imports amidst the weakening of the US Dollar. Revenues,thus, leap-frogged by 17% to Rs. 863.8 Crores as against Rs. 738.9 Crores achieved during the previous year.Highest ever Operating ProfitsOperating Profit of the Carbon Black business at Rs. 152.6 Crores is up by 15% vis-à-vis Rs. 132.2 Crores in theprevious year. Optimised market-product-logistics mix coupled with better contribution from additionalvolumes, has complemented the profit growth. Return on Average Capital Employed (ROACE) has declinedfrom 26% in the previous year to 23% in the fiscal year 2007-08 due to heavy capital employed in thebrownfield expansion, the full benefit of which will be received during the running financial year.Business OutlookThe business is working to accelerate the Greenfield expansion by 120,000 MT. Its completion will help yourCompany to capitalise on the vibrant auto sector growth.FERTILISERSRs. Crores2007-08 2006-07 Change (%)Re-assessed Annual Capacity (MT) 864,600 864,600 —Production (MT) 880,991 1,028,065 –14%Sales (MT) 870,305 1,043,565 –17%Net Turnover 765.0 778.5 –2%Operating Profit 102.4 129.6 –21%PBIT 84.5 100.9 –16%Capital Employed 531.3 400.7 33%ROACE (%) 18% 29% —Note : Figures include corresponding figures of Argon Gas Unit as the unit uses waste gases from fertilisers division.(22)
MANAGEMENT’S DISCUSSION AND ANALYSISPerformance ReviewThe demand for agricultural inputs — Fertilisers, Seeds and Agrochemicals — continued to rise at a healthyrate. Demand for nitrogenous, phosphatic and potash fertilisers grew by 5 to 7% in the current year. Favourableweather conditions helped the agriculture sector.The urea production and the operating profit for the year were impacted due to the plant shutdown forde-bottlenecking and maintenance and the subsequent plant breakdown. The business has taken steps tostabilise production and ensure smooth operations. The loss was partly offset by the insurance claim ofRs. 20.3 Crores, accounted for during the year. Revenues were marginally lower at Rs. 765 Crores. Operatingprofit for the year was lower at Rs. 102.4 Crores due to lower sales volumes and higher energy costs. Thebusiness also accounted for Rs. 2.4 Crores from sale of carbon credits during the year. The business receivedfertilisers bonds worth Rs. 56 Crores during the year. The mark to market loss of Rs. 3.2 Crores on these bondshas been provided for.Indo Gulf’s urea “Birla Shaktiman” and neem coated urea “Krishidev” continued to be the preferred choiceof farmers. The fertiliser business is now working on other value added urea formulations.The business has taken several initiatives to widen its product portfolio and has repositioned itself as a‘Complete Agri-solution Provider’, offering farmers all the products and services right from sowing to harvesting.This is a significant step towards future growth.Fertiliser Pricing Policy ReviewThe National Pricing Policy-III (NPS-III) was announced by the Government of India on 8 th March, 2007, effectivefrom 1 st October, 2006. This was coupled with the introduction of a web-based ‘Fertiliser Monitoring System’.This has helped in ensuring more equitable distribution and better availability of fertilisers in the remoteareas.Business OutlookIndustry experts forecast urea demand to grow by 5 to 6% annually to reach 30 million MT by 2010.The present urea production capacity in the country is about 20 million MT against total domestic demandof 26 million MT. In the year 2007-08, the Government imported about 6.8 million MT of urea to meet theurea deficit.In the new policy (NPS-III), the Government has done away with the requirement of approval forde-bottlenecking. Also, the Government is eager to increase the domestic production capacity, and the policyis being worked upon in this regard. The business is now offering farmers a full range of agricultural productsand services, including value adding seeds, balanced nutrients and quality agro-chemicals. The outlook forthe business continues to be positive.INSULATORSRs. CroresNote :2007-08 2006-07 Change (%)Production (MT) 32,921 21,358 54%Sales Volumes (MT) 32,304 22,966 41%Net Turnover 398.7 241.2 65%Operating Profit 136.3 54.3 151%PBIT 122.5 42.2 190%Capital Employed 240.0 186.1 29%ROACE (%) 58% 23% —Insulators manufacturing business (formerly 50:50 JV) became subsidiary of Nuvo w.e.f. 29 th November, 2006, andmerged with Nuvo w.e.f. 1 st April, 2007. However, figures shown above are on comparable basis.(23)
Page 2 and 3: Mr. G. D. Birla and Mr. Aditya Birl
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Page 9 and 10: ADITYA BIRLA NUVO LIMITEDBOARD OF D
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ADITYA BIRLA NUVO LIMITEDRegistered
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2007-08 - Aditya Birla Nuvo, Ltd

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