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Phillips Carbon Black Directors Report, Phillips Carbon Reports by Directors
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Phillips Carbon Black
BSE: 506590|NSE: PHILIPCARB|ISIN: INE602A01015|SECTOR: Chemicals
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Download Annual Report PDF Format 2013 | 2012 | 2011 | 2010
Directors Report Year End : Mar '13    Mar 12
The Directors have pleasure in presenting the Fifty-second Report and
 Accounts of Phillips Carbon Black Limited for the financial year ended
 31st March, 2013.
 
 FINANCIAL HIGHLIGHTS
 
                                            (Rs. in crore)
    
 Year ended                        31.03.13       31.03.12
 
 Revenue -
 
 - Carbon Black                     2192.14        2096.97
 
 - Power                              88.58          83.69
 
 - Other Income                        9.27          10.44
 
 - Other Operating Revenues            4.19           6.12
 
 Total Revenue                      2294.18        2197.22
 
 PBDIT                                74.97         210.29
 
 Less: Interest                       64.22          58.28
 
 PBDT                                 10.75         152.01
 
 Less: Depreciation                   50.79          48.59
 
 PBT                                 (40.04)        103.42
 
 Provision for Taxation              (19.39)         16.30
 
 (Net of deferred tax)
 
 PAT                                 (20.65)         87.12
 
 Balance brought forward             278.23         215.85
 
 Profit available for Appropriation  257.58         302.97
 
 Proposed Dividend                     1.72          13.79
 
 Tax on aforesaid Dividend             0.29           2.24
 
 Transfer to General Reserve            --            8.71
 
 Balance carried forward to          255.57         278.23
 
 Balance Sheet
 
 
 DIVIDEND
 
 Your Directors recommend for approval of Members at the ensuing Annual
 General Meeting, a dividend of 5% i.e.  @ Re. 0.50/- per share out of
 past profits, in view of the absence of profit during the year under
 review, which will absorb Rs. 1.72 crore. The tax on aforesaid dividend
 to be borne by the Company will be Rs. 0.29 crore.
 
 INDUSTRY STRUCTURE & DEVELOPMENT
 
 While global demand for carbon black remained stable during 2012 at
 11.3 million MT, global capacity stood as 14.8 million MT - capacity
 utilization was 76%.
 
 In India, consumption of carbon black increased 3.9% from 6,70,000 MT
 in 2011 to 6,95,000 MT in 2012. Total production during 2012 was
 6,76,000 MT. Total capacity of the Indian carbon black industry stood
 at 10,27,000 MT during 2012, with a capacity utilization of 66%.
 
 The domestic carbon black industry was impacted by a
 
 slowdown within the automobile sector as well as by increased dumping
 of carbon black into India by China and other countries. Total imports
 of carbon black in India rose to 1,28,000 MT during FY13 from 1,17,000
 MT in the earlier year, the major chunk of imports was from China, at
 88,000 MT. As a result, domestic sales of carbon black were impacted
 and all carbon black companies had to undertake production cuts during
 the second half of the year.
 
 Your Company completed expansion of its 8 MW co-generation power plant
 at Mundra within the scheduled time and expects to commission shortly
 the second line of 50,000 MT capacity at Kochi.
 
 PERFORMANCE
 
 Carbon Black
 
 Your Company, made operating profit (PBDIT) of Rs. 74.97 crore in FY 13
 vis--vis Rs. 210.29 crore in the previous year.  Amongst the major
 reasons for this swing in operating profit are --
 
 1.  Drop in domestic contribution per MT due to dumping by China,
 coupled with the inability to pass on the cost increase.
 
 2.  Drop in export volume and contribution due to slowdown in Europe,
 as well as dumping by China in South East Asia.
 
 Power
 
 Revenue from sale of power was higher in FY13 - Rs. 88.58 crore
 vis--vis Rs. 83.69 crore in FY12.The Company''s overall power
 generation capacity rose to 76 MW with the commissioning of the 8 MW
 co-generation power plant at Mundra.
 
 Manufacturing
 
 Your Company improved its global ranking to No. 6 (based on year end
 capacity) during the year. The strategic location of its four plants in
 different parts of India should facilitate your Company and optimize
 logistics costs within India and outside.
 
 Research and Development
 
 All the R & D units located at Durgapur, Kochi, Palej and Mundra
 continue to receive recognition as in-house Research and Development
 units from the Department of Scientific and Industrial Research,
 Ministry of Science and Technology.
 
 Your Company successfully - i) developed more new grades for domestic
 and international markets, ii) improved product characteristics to meet
 more stringent customer specifications, iii) continued recasting of
 Standard Operating Procedures iv) State of the Art Rubber Application
 Laboratory established, v) Reactor design and operating conditions
 suitably modified to improve yield.
 
 Environment, Health, Safety and Social Responsibility
 
 PCBL is committed to preserve and enrich environment by conducting all
 its operations in an environment friendly and safe manner. The CSR
 initiatives are also focused to touch the lives of the communities in
 and around our manufacturing units by supporting environmental, health
 care and educational programmes.
 
 The CSR team at Kochi has completed five years in providing evening
 tuition classes to below poverty line children. The CSR team at
 Durgapur in association with Rotary club of Durgapur has started a
 computer literacy program for housewives and students of nearby
 communities.
 
 The Kochi team has bagged awards in safety and CSR area: State Safety
 Award for 2012 in the Large Factories category in the
 Chemical/Petro-Chemical Sector and Global CSR Award. The Palej unit has
 received Greentech Environment award in Gold category.
 
 Human Resource Development
 
 Focus on Human Resource Development continues to give an edge to the
 business in this era of global competition. We are marking our presence
 across geographies by putting teams at USA, Europe, South East Asia and
 Japan.
 
 We continue with our efforts to enhance the transparency and
 accessibility of all HR processes to our people across locations by
 adding new features like online suggestion system, online access to PF
 account and online health insurance system on the employee portal.
 These efforts have been recognized by Greentech Foundation who has
 awarded PCBL its Greentech HR Award 2013 for Technology Excellence in
 HR in Platinum Category.
 
 Industrial relation scenario at all the units has remained healthy and
 forward looking. The Palej Team has received prestigious Greentech HR
 Award 2013 for Best IR Strategy in Silver Category.
 
 Internal Control System and Adequacy
 
 Your Company has adequate internal control systems in every area of
 operation. Services of internal and external auditors are utilized from
 time to time, as also its in-house expertise and resources. The Company
 continuously upgrades these systems in line with the best available
 material practices.
 
 These reports and deviations are regularly discussed with members of
 Management Committee and actions taken whenever necessary.
 
 An independent Audit Committee of the Board reviews the adequacy of
 Internal Control.
 
 Opportunities and Threats
 
 Your Company is always on the lookout for opportunities that exist in
 its business.
 
 Opportunities
 
 - Major tyre companies had expanded their capacity and capacity
 utilization is expected to improve further during FY 14/15.
 
 - Government''s thrust on development of infrastructure continues. While
 the short term growth outlook in India suffered a setback during FY13,
 the fundamentals of the economy remain strong. With the RBI expected to
 step in to lower interest rates during the coming year, investments are
 expected to pick up and the growth story would come back on track.
 
 - Power continues to be an attractive segment for your company for
 improving profitability.
 
 Threats
 
 - Imports of carbon black from China continue to be a major threat for
 the entire domestic industry.
 
 - Simulltaneous expansion of carbon black manufacturing capacities by
 all domestic competitors.
 
 - Inadequate infrastructure at ports, causing detention of vessels and
 higher freight cost.
 
 - Continuing high inflation which may put a dampner on the purchasing
 power of customers.
 
 - Fluctuation of Rupee and increase in financing cost.
 
 Segment wise Performance
 
 The Performance of Carbon Black and Power segment has been covered in
 this Report earlier.
 
 Risks and Concern
 
 The main raw material for the Company - Carbon Black Feedstock (CBFS)
 is residual oil from distillation process of crude and is subject to
 frequent volatility, whereas the price of finished carbon black is
 revised every quarter. In the event the Company is unable to timely
 pass on increased CBFS cost, it may have adverse impact on the
 Company''s profit.  Increase in carbon black import or drop in carbon
 black demand may have serious implications on the activity level of the
 carbon black segment and consequently the availability of lean gas for
 the power segment.
 
 The Company is also exposed to risks from fluctuation of Indian Rupee
 vis--vis other currencies, interest rate, realisation for surplus
 power and regulations relating to environment.
 
 Major Expansion Plans
 
 Your Company expects to commission the 8 MW co-generation power plant
 at its Palej facility, which will take its total power generation
 capacity from 76 MW to 84 MW.
 
 Your company is also planning to set up a greenfield carbon black plant
 of capacity 140,000 MT at Chennai along with a 28 MW power plant, and
 is in the process of obtaining all approvals for the same. A Memorandum
 of Understanding (MOU) for the same has been signed with the Tamilnadu
 Government.
 
 The company''s global footprint plan is in place with the greenfield
 plant at Vietnam. The project is proceeding at a pace considered
 appropriate in view of the current global economic scenario and the
 Company''s business strategy.
 
 The Company''s new carbo-chemical business will be in place with setting
 up of a new coal tar distillation plant in Orissa with capacity of
 1,50,000 mtpa coal tar processing and 50,000 mtpa soft pitch
 processing. The plant is expected to be commissioned within 12 months
 from the date of receipt of environment clearance.
 
 Subsidiaries
 
 In accordance with the general exemption granted by Ministry of
 Corporate Affairs under section 212(8) of the Companies Act, 1956,
 (''the Act'') the accounts of the subsidiaries namely, Phillips Carbon
 Black Cyprus Holdings Limited, PCBL Netherlands Holdings B.V., Phillips
 Carbon Black Vietnam Joint Stock Company and Goodluck Dealcom Private
 Limited for the year 2012-13 and the related detailed information will
 be made available to the holding and subsidiary companies investors
 seeking such information at any point of time. Hence, accounts of such
 subsidiaries are not attached. Copies of the annual accounts of the
 subsidiary companies will also be kept open for inspection by any
 investor in the Registered Office of the Company and of the subsidiary
 companies concerned. The Company shall furnish a hard copy of accounts
 of subsidiaries to any shareholder on demand. The Company publishes
 Consolidated Financial Statements of the Company and its subsidiaries
 duly audited by Messrs Price Waterhouse, Kolkata, Auditors, prepared in
 compliance with the applicable Accounting Standards and the Listing
 Agreement with the Stock Exchanges. The Consolidated Financial
 Statements for the year 2012-13 form part of the Annual Report and
 Accounts.
 
 FUTURE OUTLOOK
 
 Carbon Black
 
 Demand growth for carbon black continues to be robust with the global
 demand expected to grow at a CAGR of 4.8 % from 2011 to 2015. Expansion
 plans of all tyre manufacturers in India as well as a few global majors
 are on track and are expected to be completed within FY14-FY15.
 Domestic demand for carbon black is expected to grow at a CAGR of 6.6%
 during FY 11 to FY 15. With the expansion plans as detailed in this
 respect, your Company is well poised to meet the increasing demand in
 the domestic market.
 
 Overseas demand for carbon black is expected to grow further during
 FY14. Your Company has made significant forays into overseas markets
 such as Europe, South East Asia and US. The company will continue to
 place emphasis
 
 on exports during FY14 to mitigate any possible situation of excess
 supply in domestic markets.
 
 Power
 
 Your Company''s initiative to create additional revenue from power is
 likely to grow further in the coming years.  With the commissioning of
 8 MW CPP at Palej, the total installed capacity will reach 84 MW.
 
 Steps in manufacturing and procurement
 
 To remain competitive in the current challenges of economy and
 industry, the Company has taken following steps in manufacturing and
 procurement:
 
 a.  Improve yields.
 
 b.  Develop new sources for procurement of raw materials like CBFS and
 CBO which are contributing by way of better yields and lower prices.
 
 c.  Strengthen marketing and technical functions.
 
 d.  Undertaken initiatives in manufacturing to reduce variability in
 process.
 
 Conservation of Energy, Technology Absorption, Foreign Exchange
 Earnings and Outgo
 
 A statement giving details of conservation of energy, technology
 absorption, foreign exchange earnings and outgo, as required under
 Section 217(1)(e) of the Companies Act, 1956 read with Companies
 (Disclosure of Particulars in the Report of the Board of Directors)
 Rules, 1988 is annexed. This forms an integral part of this Report.
 
 Public Deposits
 
 The Company does not have any Fixed Deposit Scheme and has repaid all
 Fixed Deposits that matured and were claimed by the depositors under
 the earlier Fixed Deposit Schemes.  Matured unclaimed deposits as on
 31st March, 2013 amounted to Rs. 45,000/- Apart from matured unclaimed
 deposits, no amount is outstanding as on 31st March, 2013. Reminders
 have been sent to depositors who have not claimed repayment of matured
 deposits.
 
 Particulars of Employees
 
 The information as required in accordance with Section 217(2A) of the
 Act read with the Companies (Particulars of Employees) Rules,1975, as
 amended, is set out in an annexure to this Report. However, as per the
 provisions of Section 219(1)(b)(iv) of the Act, the Report and the
 Accounts are being sent to all the Shareholders of the Company
 excluding the aforesaid information. Any shareholder interested in
 obtaining such information may write to the Company Secretary at the
 Registered Office of the Company. The said information is also
 available for inspection at the Registered Office during working hours
 up to the date of the Annual General Meeting.
 
 Corporate Governance
 
 Under Clause 49 of the Listing Agreement with the Stock Exchanges, a
 section on Corporate Governance together with a certificate from the
 Company''s Auditors confirming compliance is set out in the Annexure
 forming part of this Annual Report.
 
 Directors'' Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 to the best of their knowledge and belief confirm that:
 
 i) in the preparation of the annual accounts, the applicable accounting
 standards have been followed and that there are no material departures;
 
 ii) appropriate accounting policies have been selected and applied
 consistently and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair view of the state of affairs of
 the Company at the end of financial year and of profit or loss of the
 Company for the period;
 
 iii) proper and sufficient care have been taken, for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities;
 
 iv) the annual accounts have been prepared on a going concern basis.
 
 Auditors
 
 The Auditors, Messrs Price Waterhouse, retire at the ensuing Annual
 General Meeting and are eligible for re-appointment.
 
 Cost Audit
 
 The Central Government has approved the appointment of Messrs Shome &
 Banerjee, Cost Accountants, for conducting cost audit for the financial
 year ended 31st March, 2013.
 
 Messrs Shome & Banerjee, Cost Accountants, have given their consent
 along with their Certificate of Independence for conducting the audit
 of the cost accounts for the financial year ending 31st March, 2014, if
 appointed.
 
 Cost Audit Report for the financial year ended 31st March, 2012 was
 filed on 30th January, 2013.
 
 Directors
 
 Mr. C R Paul and Mr. Paras K Chowdhary, retire by rotation and being
 eligible offer themselves for re-appointment.
 
 Dr. R P Goenka, Chairman Emeritus, passed away on 14th April, 2013.
 
 Forward - looking Statement
 
 This Report contains forward-looking statements that involve risks and
 uncertainties. Actual results, performance or achievements could differ
 materially from those expressed or implied in such forward-looking
 statements. Significant factors that could make a difference to the
 Company''s operations include domestic and international economic
 conditions affecting demand-supply and price conditions, foreign
 exchange fluctuations, changes in government regulations, tax regimes
 and other statutes.
 
 Acknowledgement
 
 Your Directors record their grateful appreciation for the
 encouragement, assistance and co-operation received from members,
 government authorities, banks and customers.  They also thank them for
 the trust reposed in the Management and wish to thank all employees for
 their commitment and contributions.
 
                              For and on behalf of the Board
 
 Kolkata                      Sanjiv Goenka
 
 23rd May, 2013               Chairman
Source : Dion Global Solutions Limited
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