MANAGEMENT DISCUSSION AND ANALYSIS REPORT Business Overview: Your company is a 100% EOU involved in Agribusiness. Global Market conditions & the weather plays a major part in the company's performance. Global market conditions continue to be challenging during the year under review due to the low domestic growths recorded in the importing countries particularly USA, Europe & Japan. Prices for the major products of the company is under brssure due to the above conditions particularly our major product Marigold oleoresin due to the patent expiry in 2014. Weather played a negative role with absence of rainfall for almost 70 days during the peak crop stage during the year under review. Continued! high level of Inflation in India also resulted in high wage costs leading to significant increase in employee costs. However, your company's efforts in improving the Costs & efficiencies with special emphasis on Cost reduction programmes at every unit operations across the supply chain, product diversification & the debrciated Indian rupee, helped the company to maintain a healthy Profit levels. Margin brssures in Marigold due to cost escalations, Chinese competition & substantial lower prices for post patent food grade made us to strategically move to higher volumes in marigold to sustain the growth and market share. Your company is happy to confirm that we have made good inroads into feed market which is a stepping stone for further expansions in the years to come. The Spice Oleo business is also steadily improving at 10 — 15% year to year. In the value added beverages verticals, your company continue to do well in Decaffeinated tea segment with the support of your subsidiary company AVT Tea Services Ltd., getting higher volumes and the extraction plant improving the quality & costs. Instant Tea segment has made steady progress and have become very competitive in price for a better quality output, the result of which is seen the last half of the year with some traction. This is expected to bring in much larger volumes with better contribution in the near future. Performance at a glance Your Company recorded a turnover of Rs 268.47 crores for 2015-16 against Rs 259.88 crores of brvious year. The company profit levels continue to be healthy by focusing on cost control & efficiency improvement measures implemented during the year. Company has repaid all long tem and short term borrowings and recorded "Zero Debt "status for the third consecutive year. Future outlook The Marigold Business continues to dominate the top line and bottom line of the company. The aim of your company is to bring this dependence on marigold down & sbrad the risk in future on one part while consolidating in the major product by becoming the least cost producer of the product. Your company is one of the fully integrated & most profitable companies in the Marigold oleoresin business. Given its scale of operations & continued focus on cost efficiencies, your company will soon become the least cost producer of Marigold oleoresin in the world. To achieve this end, your company has invested on most modern technology adaption for the Marigold Hybrid seed development on one hand & improve efficiencies through innovative process modifications on the other. On the Marigold growing areas, Company is going aggressive in getting more areas and reaching out to larger farmer base. On the Spice oils & oleoresin segment, Your Company is looking for substantial increase on the top lines retaining the margin in the years to come. Company is tapping the possibilities of spice oleos being used for other purposes other than food which is a highly growing new market. Instant tea business is expected to take off in 2016 — 17 through customer focus & increasing the number of customers including the Multinationals & penetrating to the new geographies. On Decaff, Your Company plans to improve the capacity utilization of the plant from the current levels. Development work is continuously on at AVT NPL's R & D for new products for the future. Substantial bench & pilot scale work is going on for adapting Innovative new technologies for improving the costs & efficiencies in the current verticals. Risk Mitigation The major risk factors envisaged are the ever increasing employee costs and the over dependence on one product/ customer Marigold oleoresin/Kemin (controllable apart from the key risks of monsoon failure & currency fluctuation (uncontrollable). To address these concerns, your company has embarked on increasing the employee productivity, increasing the volume, attracting multiple new customers for feed grade marigold and enhancing the product portfolio. For addressing the uncontrollables, AVT Natural uses cultivation in different agro climatic zones / multi season growing and appropriate rupee hedging strategies. To address the challenges of Post patent nutraceutical marigold, AVTNPL continues its thrust on efficiency improvement & cost reduction measures including adapting most modern technologies for their process. Internal Controls The Company has strong Internal controls systems commensurate with the nature of its business and the size and complexity of its operations. These are reviewed periodically by both Statutory as well as Internal Auditors and cover all offices, factories and key business areas. The Audit committee reviews adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations, including those relating to strengthening of the Company's risk management policies and systems. Human resources We continue to invest in our employees through various external and internal training programs. AVT NPL enjoys excellent employee relations which have been built over years by taking various initiatives to enhance the employee morale. Management believes and take actions to update the technical and Managerial skills of employees to achieve the much needed competitive advantage in the global market. As on 31st March 2016, the Company is having the strength of 226 employees. |
