Williamson Tea Assam

The Directors have pleasure in presenting their Report together with
 the Audited Accounts for the year ended 31st March, 2005:
 
                                                       (Rupees in Lakhs)
 
 Profit before Depreciation and Interest                         1763.85
 
 Depreciation for the year                                       1209.24
 
 Less : Transferred from
 Revaluation Reserve                             454.43           754.81
 
 Interest                                                         110.67
 
 Profit before Taxation                                           898.37
 
 Provision for Taxation :
 
 Current Tax                                                      190.00
 
 Deferred Tax                                  (133.38)            56.62
 
 Profit after Taxation                                            841.73
 
 Profit brought forward from previous year                          8.86
 
                                                                  850.61
 APPROPRIATION :
 
 The Directors recommend as follows :
 
 Proposed dividend                                                567.00
 
 Tax on proposed dividend                                          79.52
 
 Tax on dividend for earlier year                                   1.45
 
 Transfer to General Reserve                                       85.00
 
 Balance carried to Balance Sheet                                 117.64
 
                                                                  850.61
 
 DIVIDEND
 
 Your Directors recommend a Dividend of 40% i. e. Rs.4/- per share on
 the 1,41,75,000 issued, subscribed and fully paid up Equity Shares of
 Rs. 10/- each of the Company absorbing Rs. 567.00 Lakhs for the
 financial year ended 31st March, 2005 which is same as was paid in the
 previous financial year.
 
 OPERATIONS
 
 The production during the financial year ended 31st March, 2005 was
 216.57 Lakh Kgs of tea as against 232.91 Lakh Kgs in the previous
 financial year. The crop prospect for the current year appears good
 with favourable climatic conditions prevalent till date. The Company
 continued its planned policy to update the factory machinery. The
 ultimate aim being to produce consistent good quality tea for which
 your Company is renowned.
 
 PRICES
 
 After the depressed price situation continuing for the last five years
 during the financial year 2004-2005 the tea prices witnessed an
 improvement particularly at the beginning of the season. The Industry
 wide quality awareness attributed a lot to price escalation. The Assam
 District average for the year 2004/2005 was Rs. 73.55 as against Rs.
 63.03 of the previous year. However, your Company, because of its
 continuous thrust for producing quality teas was able to achieve an
 average price of Rs. 87.52 in the year under review.
 
 EXPORTS
 
 During the year 2004 the total exports from India increased by 9.9
 million kgs to 183.6 million kg. from 173.7 million kgs of the previous
 year and the total export earnings increased from Rs. 1590.02 Crores to
 Rs. 1673.5 Crores. However, the net tea exports i.e. total exports
 minus total imports of tea, suffered greatly because tea imports jumped
 by more than 300% from 9.86 million kgs in 2003 to 30.52 million kgs in
 2004. Opening up of markets in Iraq, Iran, Pakistan, Libya and other
 Middle East countries raised the exports in these countries while the
 shipments to traditional markets in CIS countries and others has
 declined considerably. Your Company exported 9.5 million kg of tea in
 the year 2004/05 registering an increase of 0.6 million kgs over the
 previous year at an average price of Rs. 94.30 against the average
 price of Rs. 92.39 of the last financial year. This achievement helps
 your Company to maintain its position as one of the leading
 producer-exporters in the country. This distinction was attributable to
 the excellent services and the efforts rendered by our overseas selling
 agent George Williamson & Co. Limited, UK, by way of continuous
 exploring and developing the new markets for the Companys tea all over
 the world.
 
 DEVELOPMENT PROGRAMME
 
 New Continuous Fermenting Machines and a VFBD machine were installed as
 part of the ongoing development of our tea factories.
 
 The Uprooting and Replanting Programme continues in a phased manner and
 the Young Teas will make valuable additions to crop in the forthcoming
 years.
 
 Your Company, on the health and hygiene of the workers laid a lot of
 emphasis. With the supply of filtered piped water for drinking to the
 workers colonies the standard of living has improved. Electrification
 of the workers houses continued in a phased manner.
 
 The `Mothers Club existent on the estates took active part in Family
 Planning measures. `Well Baby Clinics were organised at the estates,
 which was well attended by the workers.
 
 During the year the Company incurred a Capital expenditure of Rs.
 443.93 Lakhs. During the last five financial years the total Capital
 expenditure aggregated to Rs. 5715.52 Lakhs.
 
 EDUCATIONAL, CULTURAL AND WELFARE ACTIVITIES
 
 The Assam Valley School continues to provide excellent opportunity to
 the children of the planting community and the North East in terms of
 both academics and overall development.
 
 The Assam Valley Literary Award for 2004 was presented to Dr. Lakshmi
 Nandan Bora in acknowledgement of her contribution in the field of
 Assamese Literature. The Williamson Magor Education Trust funds this
 literary award.
 
 Your Company has three Central Hospitals, which provide specialized
 medical care to the estates employees, over and above the individual
 hospitals on each estate with a resident Doctor. The Central Hospitals
 and estate hospitals also provide medical assistance to the nearby
 villages through medical camps and mobile medical vans.
 
 The Bodo Handloom Scheme at Borengajuli Tea Estate continued to grow in
 strength. The variety of handloom items produced, sold very well in
 various outlets and at the Trade Fair in Assam. With the gainful
 employment of the local womenfolk has vastly improved their economic
 and financial status. This is very evident when one sees the
 improvement of their houses from temporary structures in the past to
 permanent houses now.
 
 SUBSIDIARY COMPANY
 
 In August, 2004 the Company acquired 3000 fully paid up Equity Shares
 of Rs.100/- each of Nilpur Tea Company Private Limited consequent upon
 which the said Company became a Wholly-owned Subsidiary of the Company.
 In order to achieve the benefits of the economies of scale, reduction
 of overheads as well as for better and productive utilization of
 various resources and optimum recovery and growth of business of both
 Companies with their combined resources, the Board of Directors of the
 Company at its Meeting held on 15th March, 2005 approved the Scheme of
 Amalgamatiori of Nilpur Tea Company Private Ltd., with the Company with
 effect from 1st April, 2005 subject to the approvals required under
 statute and also of the shareholders of both the Companies.
 Subsequently, necessary petitions were presented before the High Court
 at Kolkata in this regard and the Court has dispensed with the holding
 of a separate meeting of the members of Nilpur Tea Co. Pvt. Ltd.
 Necessary petition to the Honble High Court at Guwahati will be made
 shortly and a separate meeting of the members of the Company will be
 convened by the Court for seeking the approval of the members to the
 Scheme.
 
 Necessary statement of the Companys interest in the subsidiary is
 annexed to this Report pursuant to Section 212(1)(e) of the Corn panies
 Act, 1956 (the Act). The Company has made an application to the
 Central Government u/s 212(8) of the Act, seeking exemption from
 attaching to its Annual Report and Accounts the Balance Sheet, Profit &
 Loss Account, Report of the Board of Directors and the Report of the
 Auditors on the Accounts of the Subsidiary for the financial year ended
 31st March, 2005 and expecting to receive the said approval soon
 failing which the aforesaid documents would be annexed to the Annual
 Report and Accounts of the Company. However, in case the exemption as
 aforesaid is granted by the Central Government the Company will
 continue to be liable to send the full accounts of the Subsidiary to a
 member of the Company or its subsidiary upon receiving a request from
 him in this respect. As per the requirements of Clause 32 of the
 Listing Agreement, the consolidated financial statements duly audited
 by the Statutory Auditors of the Company are also annexed to the Annual
 Report.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS AND OUTGO
 
 A statement giving details of the conservation of energy, technology
 absorption, foreign exchange earnings and outgo in accordance with the
 Companies (Disclosure of Particulars in the Report of the Board of
 Directors) Rules 1988 is annexed to this Report.
 
 DIRECTORS
 
 Since the last Report, Mr. T. R. Swaminathan, one of the Founder
 Directors of the Company retired from the Board with effect from the
 close of business on 31st March, 2005 and Mr. P. K. Majumder, Chartered
 Accountant was appointed on the Board with effect from 1st April, 2005
 in the vacancy caused by the resignation of Mr. Swaminathan. During
 his long association with the Company Mr. Swaminathan extended
 considerable wise and valuable counsel to the Company on various
 functions particularly finance and legal matters and the Company would
 miss him and his contributions to the Board. The Board records its
 sincere appreciation for the valuable services rendered by Mr. T. R.
 Swaminathan during his association with the Company since its
 inception.
 
 Pursuant to the provisions of the Articles of Association of the
 Company, Mr. Jatin Hazarika and Lt. Gen. K. S. Brar retire by rotation
 and being eligible, offer themselves for re-appointment. The required
 information about the above two Directors as stipulated in Clause 49 of
 the Listing Agreement have been furnished in the Notice convening the
 Annual General Meeting.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Our Directors would like to inform the members that the audited
 accounts containing the financial statements for the year 2004-05 are
 in full conformity with the requirement of the Companies Act, 1956 and
 they believe that the financial statements reflect fairly, the form and
 substance of transactions carried out during the year, and reasonably
 present the Companys financial condition and results of operations.
 These financial statements have been audited by the Statutory Auditors
 M/s. Lovelock & Lewes, Chartered Accountants, Kolkata.
 
 Based on the same, your Directors further confirm that :-
 
 (i) In the preparation of the annual accounts, applicable accounting
 standards have been followed;
 
 (ii) They have selected such accounting policies and applied them
 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 the financial year 2004-05 and of the profit
 of the Company for that year;
 
 (iii) Proper and sufficient care has been taken for the maintenance of
 accounting records in accordance with the provisions of the Companies
 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.
 
 Report on Corporate Goverance
 
 A separate report on Corporate Goverance along with auditors
 Certificate on its Compliance is Annexed to this report
 
 Management Discussion and Analysis Report
 
 Industry Structure and Developments
 
 India is the largest producer of tea in the world; the annual
 production varies between 820 million kg to 850 million kgs., against
 the average world production of 3.2 billion kgs. The other major
 producing countries are China,
 
 Sri Lanka, Kenya, Indonesia and Vietnam. The states of Assam contribute
 almost 50% of the total Indian Tea produced and the balance 50% is
 produced almost equally by South Indian tea estates and West Bengal.
 
 The Indian Tea Industry provides employment to over 1.2 million people,
 50% of them being women. The Industry is also responsible for socio
 economic development of the relatively remote areas where the Estates
 are situate and is one of the major foreign exchange earners in the
 country.
 
 During the year 2004 tea production in India dropped to 820.2 million
 kgs from 857.1 million kgs registering a fall of 36.9 million kgs. The
 North India production fell by 29.1 million kgs. whereas in South India
 output dropped by 7.8 million kgs. The weather conditions were the
 primary factor for the lower crop besides reduced levels of application
 of necessary inputs by many estates resulting from economic
 constraints.
 
 India is also the largest consumer of tea and its domestic consumption
 is growing at the rate of 2% every year. During the year 2004 domestic
 consumption was around 710 million kgs, which is likely to go up to 725
 million kgs in 2005.
 
 Your Company has produced 21.66 million kgs of tea in the financial
 year 2004-05 compared with 23.29 million kgs of the previous financial
 year. However, the decrease in production is attributable to the drop
 in production of tea from bought leaf while the production from own
 crops was almost the same as of the previous year.
 
 With lower production of tea during 2004/05 and the opening up of the
 Season 2005/06 with a very low level of opening stock are likely to
 result in improvement of realisation price in the current season. The
 resumption of imports by Iran and the improvement of the business
 environment in Iraq are promising signs for increased demand for Indian
 Teas from this region and the export prospects for the forthcoming year
 appears encouraging as a whole. Moreover the huge domestic market and
 the very low per capita consumption of tea in the country also offer
 significant potential for the Industry to boost demand.
 
 Opportunities, Threats, Risks & Concerns and Outlook
 
 India is the largest producer of tea in the world and the largest
 consumer of tea as well. Presently, 710 million kgs. tea are consumed
 in the domestic market and with the huge population in the country and
 the very low per capita consumption of tea there is a significant
 potential for increase in the domestic consumption which would boost
 the overall demand for Indian tea thereby firming up of the tea prices.
 
 A continuous and effective promotional measures focusing on the health
 properties of tea from the Government as well as the Industry would
 result in increased consumption of tea both in domestic and overseas
 markets and its improved price. Moreover, the lifting of the ban on
 imports of Indian Tea by Libya and Iran, surging export demand for
 orthodox tea from the oil rich Middle East countries and the increase
 of demand for Indian Tea from Iraq and Russia are some of the promising
 factors for capitalization of which the Industry should put up its all
 round efforts.
 
 Indian Tea is facing tough competition in the world market from tea
 produced by Sri Lanka, China, Kenya, Indonesia and Vietnam and at
 present commands only about 14% of the global market share. The cost of
 production in India, which is the highest in the world, is the main
 reason for losing its share in the export market. The high level of
 taxes, both at the Centre and the State levels, very high level of
 social cost, low productivity of labour and non-availability of
 adequate funds for replanting and rejuvenation of the old tea bushes
 are the other reasons for the low level of competitiveness of Indian
 tea in the export market. Moreover, the wages of the plantation workers
 has no linkage with their productivity or in the realisation price of
 tea. However, all these aspects are recently receiving serious
 attention of the Ministry and some relief has been provided to the
 Industry in the last Finance Act, in the form of abolition of
 additional excise duty of Re.1/- per kg of crop. The reduction in the
 rate of Agriculture Income tax from 45% to 35% by the State Government
 in Assam and the abolition of the rural employment and education cess
 by the Government of West Bengal are the welcome measures taken for the
 development of the Industry which is passing through a difficult phase.
 Moreover, the Ministry is seriously considering setting up a special
 package for the Industry to help in replantation and rejuvenation of
 tea bushes, which would certainly help the Industry in regaining some
 sort of competitiveness and improvement in quality.
 
 Presently nearly 45% of the tea bushes in India are more than 40 years
 old spreading over 2,12,000 hectares of land and their yields are
 extremely low and there is a need for government help by way of subsidy
 and loans at softer rates for carrying out the
 replantation/rejuvenation over the next 15 years.
 
 The Central Government has recently announced the formation of a
 special package of Rs. 93 Crores to be financed out of the corpus
 created from collection of additional excise duty on tea in the past
 two and a half years. Although the details of the package are not yet
 known it is expected that a majority of the amount would be used for
 providing incentives for orthodox tea production which has become
 imperative for increasing the export offtake. The increase in the
 production of orthodox teas will help India to recapture its market in
 the traditional market as well as oil rich Middle East countries. Most
 of the Wana Countries like UAE, Iran, Saudi Arabia and Egypt where
 India is trying to get a foothold, want orthodox tea for consumption.
 
 Another area of concern for the Indian Tea Industry is the gradual
 increase in import of cheaper quality of teas which are then
 re-exported as teas of Indian origin thereby resulting in the dilution
 of Indias brand equity in the international tea market.
 
 However, in a bid to ensure quality and retain the brand equity of
 Indian tea the Union Government has promulgated a new Tea Control Order
 viz. Tea (Distribution and Export) Control Order, 2005, which is
 expected to place a curb on imports of poor quality teas.
 
 The new order stipulates that all tea consignments meant for export
 would have to undergo a certification procedure under which the quality
 of tea and the country of its origin would be determined and displayed.
 The aforesaid order also prescribes for a minimum value addition norm
 of 50% on exports of imported tea and stipulates a time period of six
 months from the date of import to export the same.
 
 A more intensified and structured effort at the Industry and Government
 level to regain Indias quality image and correct the market sentiments
 in the international arena is the need of the hour.
 
 Your Company has already endeavoured to produce high quality tea
 benefits of which is reflected in achieving better prices which is
 always above the Industry average price. The Company has set up vacuum
 packing facilities in 10 of its estates to cater the demand for value
 added tea in the overseas market.
 
 As nearly 45% of its total production is exported by the Company to
 various international markets it gives an added advantage to the
 Company to combat recessionary price trends in any specific market
 including the domestic market.
 
 Moreover, the spreading over its estates in the north and south banks
 of Assam gives leverage to the Company to minimize the impact of the
 poor weather conditions in any particular area.
 
 The financial year under reference has witnessed the best combinations
 of lower production, lower stock, higher export and consequently better
 price and the Industry expects the same trend to continue in 2005
 onwards.
 
 Fortunately for the Industry, the various factors causing problems for
 overall growth of the Industry and are responsible for losing its
 export markets have been identified and few effective steps are now on
 the cards to gradually resolve these issues. With the positive signs
 like major efforts made by the Tea Board of India for promotion of
 Indian Tea to Russia, improving trade relations with Pakistan,
 reduction in the import duty on teas by Egypt from 30% to 5%,
 re-opening of export markets in countries like Iran and Libya,
 increased demand for Indian Orthodox tea from Middle East countries,
 the Industry expects an improvement in the export market for the
 forthcoming years.
 
 Your Company having excellent field and factory practices, supervision,
 R&D activities, and with its all time thrust for producing a very high
 quality tea and because of its strong presence in the international and
 domestic market is optimistic about the better prospects of the Company
 in the future years to come.
 
 Segmentwise or Productwise Performance
 
 Segment                          2004/2005                    2003/2004
                    Quantity          Value       Quantity         Value
                      Tonnes   Rs. in Lakhs         Tonnes  Rs. in Lakhs
 
 Domestic              11641        9400.94          14034      10773.89
 
 Export                 9635        9103.00           8914       8236.11
 
 Total                 21276       18503.94          22948      19010.00
 
 Internal Control Systems and their Adequacy
 
 The Company has set-up an adequate internal control system to ensure
 that all assets of the Company are protected against any unauthorised
 use and their usage are properly authorised, recorded and reported to
 the management.
 
 At the commencement of every financial year, the Audit Committee of the
 Board approves the Internal Audit programmes and the Internal Auditors
 carry out the periodic checks at all tea estates and the offices of the
 Company in accordance with the approved programme to ensure that the
 internal control systems are functioning properly and keep the audit
 committee informed of all major developments in the area as well as
 suggest the management appropriate and timely measures to rectify any
 irregularities and also for its improved operations. The Statutory and
 the internal auditors are the permanent invitees to the meetings of the
 audit committee and the audit committee interacts with them regarding
 their findings, reviews the progress of the internal audit programme
 and takes corrective measures whenever necessary based on the feedback
 received from the internal auditors.
 
 Finances and Operational Performance
 
 After five years of recession, the Tea Industry in India is looking up.
 During the last financial year, domestic consumption increased, signs
 of revival was witnessed in the export front and auction prices was
 relatively better than of previous years. However, the increase in the
 price was not so vibrant in the high quality segment.
 
 Your Company with its constant focus on tight working capital
 management and cost control has achieved significant reduction in
 interest outgo and its administrative cost. The basic financials in
 terms of cash flow, debt equity ratio, interest cover etc. continues to
 be comfortable. The Company has conducted regular in-house and
 external-training programmes for adequate orientation in various
 disciplines for its employees at all levels.
 
 With its commitment to produce high quality of teas and its policies to
 follow stringent cost control measures the Company is optimistic about
 its better profitability in the coming years particularly with a silver
 lining appearing in the arena of the Industry for a number of positive
 factors mentioned hereinbefore.
 
 Human Resources Development
 
 The Company has a large work force of over 23,000 workers employed on
 the tea estates. The welfare and well being of the workers are
 monitored closely by Labour Welfare Officers employed specifically for
 the purpose,
 
 Your Company runs three Central hospitals providing specialized medical
 care to the estates employees. The Company is committed to the welfare
 of its employees and to improve their quality of life.
 
 The Company organized orientation and need-based training courses in
 various disciplines, which were, conducted both by in-house and
 external faculties, refresher courses were held to keep the employees
 abreast of improved technologies available. Executives were also
 trained at the Tea Research Association, Jorhat on Field Management,
 Drainage and Manufacture.
 
 PERSONNEL
 
 The Industrial relations remained cordial throughout the year under
 review and your Directors wish to place on record its appreciation for
 the dedicated services rendered by the executives, staff and workers at
 all levels and the loyal services provided by the Assam Tea Plantation
 Force for safe guarding the Companys property at 17 tea estates of the
 Company which was reflected in the smooth functioning of the estates
 and uninterrupted dispatch of tea from these estates inspite of certain
 trying conditions prevalent at times. The policy of transparency and
 recognition inspired the employees to contribute their best efforts for
 the Company.
 
 AUDITORS
 
 Messrs Lovelock & Lewes, Chartered Accountants, the Auditors of the
 Company retire and, being eligible shall, subject to Section 224(2) of
 the Companies Act, 1956 be re-appointed.
 
                                                          A.L CARMICHAEL
                                                      LT. GEN. K.S. BRAR
                                    JATIN HAZARIKA        SARABJIT SINGH
                                      P.K.MAJUMDER          P.K.GANGULEE
 Kolkata, 27th May, 2005                 Directors   Wholetime Directors
 
 ANNEXURE TO DIRECTORS REPORT
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE
 EARNINGS & OUTGO
 
 Persuant to Section 217(1)(e) of the Companies Act, 1956 read with the
 Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988.
 
 FORM - A
 
 CONSERVATION OF ENERGY
 
 (A) Energy conservation measures undertaken:
 
 1. The Company pays high priority to energy conservation measures to
 reduce energy costs which inter alia includes upgradation and
 installation of new machinery to make them power and fuel efficient,
 streamlining the electricity distribution, rationalisation of the use
 of water in tea estates and timely overhauling of the power generating
 machineries.
 
 Additional investment and proposals, if any, being implemented for
 reduction of consumption of energy :
 
 2. Optimisation of power and fuel utilisation through installation of
 modern machines and streamlining of production procedures on the long
 terms measures are being carried out by the Company.
 
 Impact of measures at (1) and (2) above for reduction of energy
 consumption and consequent Impact on the cost of production of goods :
 
 FORM-B
 
 RESEARCH AND DEVELOPMENT (R&D)
 
 1. Specific Areas
 
 The R&D programme followed by the Company is an ongoing process which
 covers core areas like clonal trials, optimum level of fertilisation,
 development of high yielding quality plants, enrichment of soil and
 modernisation of manufacturing process.
 
 2. Benefits
 
 Improvement of yield and quality as well as reduction in costs.
 
 3. Plan of Action
 
 As stated earlier R&D activities are a continuous process. The
 initiatives taken in the earlier years are followed up in the
 succeeding years.
 
 4. Expenditure on R&D                                    (Rs. in Lakhs)
 
 (a) Capital                                                         Nil
 
 (b) Recurring                                                     22.79
 
 (c) Total R&D expenditure as percentage of total turnover.        0.12%
 
 TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
 
 Efforts made
 
 The Company arranges for regular training for its managerial staff to
 keep them abreast of the new and improved field and manufacturing
 process. Seminars and group discussions are also organised to keep the
 employees of the Company updated in their respective fields of
 operation.
 
 Benefits
 
 Besides improvement in quality of Tea this has opened up significant
 new marketing possibilities.
 
 Also considerable savings is being achieved in energy cost.
 
 Imported Technology:                                             Nil
 
 FOREIGN EXCHANGE EARNINGS & OUTGO
 
 Total Foreign Exchange :
 
 Earned : Rs. 8529.20 Lakhs
 
 Outgo : Rs. 5168.57 Lakhs
 
                                                         A.L. CARMICHAEL
                                                      LT. GEN. K.S. BRAR
                                                Jatin Hazarika/Directors
                                                            P.K.MAJUMDER
                                            SARABJIT Singh     Wholetime
 Kolkata, 27th May, 2005                      P.K.GANGULEE     Directors