000_GMM Directors Report-Pg-1-18.indd - GMM Pfaudler Ltd

MANAGEMENT DISCUSSION AND ANALYSIS REPORTCOMPANY OVERVIEW:The Company which was established in the year 1962, has a stateof the art manufacturing facility spread over a 20 acre plot of landlocated at Karamsad in Gujarat State, about 45 km from Vadodara.The Company enjoys leadership position in design, manufactureand marketing of glass-lined reactor vessels, storage tanks, valvesand pipe & fittings. The Company also undertakes design andfabrication of specialized chemical process equipment in Alloysteel. It has created for itself a niche position in the chemicalprocess equipment market for proprietary products manufacturedby it such as Agitated Nutsche Filters & Filter Dryers, Wiped FilmEvaporators, EconoMix Mixing Systems, Thermal Control Unitsand PTFE lined pipes & fittings. Its access to the Mavag’s highend technology for top driven Spherical Dryers, Agitated NutscheFilters & Filter Dryers for sterile applications and Magnetic DriveAgitators has complemented the Company’s position as a completeprocess solution provider for pharmaceuticals, bio pharmaceuticals,chemicals and allied segments.INDUSTRY STRUCTURE AND DEVELOPMENT:The Pharmaceutical, Agro-chemicals and Bio chemical SpecialtyChemicals business which had witnessed a considerable slow downin past few years has begun to see growth. The pharmaceuticalindustry achieved above 15% growth during the year and isexpected to continue the momentum. Further, India is becoming abase for contract manufacturing and research for the global marketand is therefore expected to invest in capacity expansion in viewof overall growing demand. This trend amongst these companieswhich represent a significant spread in our customer base, isexpected to fetch attractive returns to the company in coming times.OPPORTUNITIES & THREATS:The growing domestic market and projected positive global trendsprovide an opportunity to the company to penetrate the market.Growing agro chemical, fertilizer, petroleum and Bio-technologyindustries is also expected to provide a boost to the capital goodsindustry and build the order book for coming times.There is more interest in the overseas market for our equipment. Weexpect with the improvement in the global economy, our Companywill be well poised to take advantage of the export markets.Fluctuations in steel prices, Government policy on pharmaceuticalpricing and domestic inflationary economic conditions may hamperthe industry’s growth in future.FINANCIAL PERFORMANCE:The market environment that had slowed in the past duringpicked up from the second quarter of the year which witnessed117% growth over the proceeding quarter and was followed bythird quarter that witnessed 43% growth on quarter to quarterbasis. Average performance in fourth quarter and sluggish salesin first quarter of the year however had an adverse impact uponthe overall performance of the company. The growth witnessedby the Pharmaceutical and Specialty Chemicals during the yearhelped the company in sustaining the strong builtup of order bookwhich is expected to show better performance in the Glasslinedbusiness. The Company made significant improvement in its Mixingsystems segment during the year. The increased focus on thissegment along with the continued focus in the Glasslined productsbusiness enabled the Company to show moderate growth forthe year.Rise in labor charges and increased provision for doubtful debtsand legal expenses including those incurred towards settlement ofdispute with Nile Ltd. FOREX losses adversely impacted the year’sprofit to some extent.SEGMENT WISE OPERATIONAL PERFORMANCE:• Chemical Process EquipmentThis Division of the Company designs manufactures and marketsGMM Pfaudler Reactor Systems product line which primarilyincludes glass-lined corrosion resistant reactors, storage vessels andalloy steel equipment.This Division reported sales of ` 1,279.30 million; marginally morethan that of previous year contributing 83% to the total sales of thecompany. This Division of the Company continues to enjoy thenumber one manufacturer of glass-lined equipment in India. Theprofit from this segment was ` 185.89 million a increase of about12% over the previous year. The capital employed for this divisionwas ` 491.19 million increased by over 5% from the previous yearlevel.• Mixing SystemThis Division designs, manufactures and markets EconoMix Agitatorswhich provide solutions to customer’s mixing requirements. Inaddition to serving the CPI this Division also caters to the biotechnology,mining and waste water treatment industry. Sales ofthis Division of the Company increased by over 96% to ` 162.90from 83.1 million in the previous financial year. The profit from thissegment was ` 18.44 million a increase of more than 109% over theprevious year. This segment was most affected by the rise in input9