DIRECTORS' REPORT AND MANAGEMENT ANALYSIS Your directors are pleased to present the 19th ANNUAL REPORT with audited accounts for the year ended 31 st, March 2014. The summarized financial results of the Company are given hereunder. DIVIDEND Your directors have not recommended any dividend for the financial year. CORPORATE GOVERNANCE A detailed report on corporate governance together with a certificate from the Statutory Auditors, in compliance with Clause 49 of the Listing Agreement, is attached as part of this report. Compliance reports in respect of all laws applicable to the Company have been reviewed by the Board of Directors. MANAGEMENT DISCUSSION AND ANALYSIS REVIEW OF PERFORMANCE 1. The Company recorded revenue of Rs. 24,043.15 lacs (including other income of Rs.105.56 lacs) for the year ended 31 st March,2014 as against Rs. 20,038.49 lacs (including other income of Rs. 700.36 lacs) in the previous year ended 31.03.2013. 2. The Profit before tax was at Rs. 973.58 lacs for the year ended 31 st March,2014 as compared to Rs.136.54 lacs during the corresponding in the last year. 3. The Net Profit was at Rs.680.59 lacs as on 31.03.2014 as against Rs.103.45 lacs in the previous year. 4. The quantity sold during the year 2013-14 stood at 6674 MTs, when compared to 6215 MT during the previous year ended31stMarch,2013. KEY FACTORS WHICH AFFECT THE PERFORMANCE OF THE COMPANY a. Adverse movement in Egg Powder rates. b. Volatility in prices of raw materials like egg etc. CAPITAL EXPENDITURE AND FUNDING i. The Capital Expenditure incurred and funded for the year is Rs.90.78 lacs of which Rs.71.86 lacs pertain to plant and machinery. ii. During the year under review, your company has sold/deleted/adjusted assets worth Rs.1164.57 lacs. OUTLOOK OFTHE INDUSTRY Low cost of eggs in US, resulting in reduced egg product price by US resulting in stiff competition on price front especially in Japan and Europe. Reduced import duty and NIL duty for certain countries like Japan is giving us stiff competition At the same time, reduced restitution announced recently in Europe has given us a break. The industry being Egg processing , which is predominantly raw material intensive sector and hence fluctuation in egg price widely influence cash position and operating margin of this sector. The unprecedented increase in the prices of eggs nearly most part of the financial year had a substantial adverse effect on the bottom line of the company for the current year. Performance of the previous year was reported to be good and it is a high record of achieving the turnover of Rs.237.10 crores, predominantly in view of the fact that higher selling price and addition of egg yolk liquid resulting in more separation of Egg albumen powder. Most importantly, increased volume of the egg yolk powder and whole egg powder in Japanese market and also entered the new market Nigeria. Egg processing industries in India do not have any domestic market for processed eggs and therefore the performance of the company is having a direct correlation to the performance of the global economy. Dollar/Euro Vs Indian rupee is comparatively betterthan the past and has given considerable increase in price realization. Overall for the financial year ended 31 st March 2014, the company has evolved strategies in such a way to increase the selling price levels and volume with the existing buyers. Egg albumen price has increased by US $ 2.0/kg is a good sign. Developed new products with additives in the egg liquid enhancing the shelf life, thereby we can export these egg liquids to other Asian countries. We have captured long term contract with two countries forthe enhanced shelf life product of egg liquid with additives. Also, in the process of developing new products using egg powders. Ready to use egg blends [bakery mix] for both the export and domestic market for bakery applications. OTHER RELATED REASONS FOR THE PERFORMANCE OF THE COMPANY AND INDUSTRY Demand for the egg powder in the export market expected to improve substantially. Recovery in global demand considered as a major growth drive. High input costs including cost of raw material is a major challenge faced by the players in the poultry sector during Financial Year 2013-2014. Registered our poultry farms under compartmentalization /establishment. The Egg powder sector had suffered a setback due to export dependence, with the advent of the global economic crisis. At this backdrop, it is believed to tap other export markets to be the most important or an important strategic focus in Financial Year 2013-2014. The company is looking at various options to improve the performance of the company. It is focused that demand for the egg powder in the export market expected to improve substantially in the ensuing years. The major growth stimulant is the recovery of global demand for end product. A major challenge faced by the players in the poultry sector during the current year is high input costs including cost of raw material. The most important strategic focus of the company during the current year would be penetrating the Russian market. Approval got from the Russian Government. Trial shipment under process. The sector in which the company is now focusing has being encountering setbacks due to export dependence, with the advent of the global economic crisis. At this backdrop, it is believed to tap other export markets to be the most important or an important strategic focus in the coming years. Indian government incentives helps us a lotto export more sales volume. A major shift in the export market segment might be required to improve price realization and a marked improvement in operational efficiencies. FUTURE PROSPECTS Reckoning with the customers' awareness improving forthe quality parameters on the one hand and the pricing of the products on taking place in the supply side on the other hand, the future prospects of the company is ensured. Though operating in a competitive environment, the uniqueness of the model ensures a comfortable level of net margin availability to your organization. SALES AND MARKETING In this highly competitive international markets for egg products, we SKM Egg Products Export (India) Limited has established a very wide network in Europe, Far East and South East Asian countries. Since we are able to maintain good relationship with customers and getting repeat orders for the past 18 years, particularly from the major markets of Japan and Europe. Normally it is very difficult to enter Japan and Europe markets where USA and European suppliers are delivering at competitive prices. But, with our management's high support our marketing and sales team has successfully established our market share in this high competition markets and sell our products at competitive prices where quality of our products is at par with Europe and USA suppliers. Our recent new product of Egg Liquid is highly acceptable in Europe and Middle East countries, and successfully penetrating in these markets. In order to increase our market share and understand customer requirements, we are participating in big international food shows and visiting customers at their place at regular intervals. Recently we have entered Nigeria and South Africa markets where we expectthe requirement of egg product is good and hope, we will have long and more business in these regions. We are confident that we will spread over our sales in Russian market also in the coming year. SUBSIDIARY COMPANY The subsidiary helps the company in a big way in identifying new customers in Europe and improved the confidence level of customers through timely and qualitative services. The subsidiary is also taking initiatives to explore into markets which are untapped by the company till now. HUMAN RESOURCES Your Company believes that its greatest assets are its people and training is an investment in long term people development, for organizational excellence. During the year under review, your Company has taken several new initiatives to ensure that the knowledge and wisdom gained over decades is handed down to the next generation of employees. A well balanced mix of domain knowledge and behavioral training was taken up towards talent transformation. These initiatives have paid good dividends in the form of a strong group of in-house facilitators of domain knowledge and an inspired team of employees geared up to serve the needs of your company's valued customer. INTERNAL CONTROL SYSTEMS AND INTERNAL AUDIT The Company maintains adequate internal Control systems and the Internal Audit is handled by a qualified Chartered Accountant and his team of subordinates. DIRECTORS 1. Smt. S. Kumutaavalli (DIN: 00002390), Non executive director retiring by rotation, being eligible offers herself for reappointment. 2. Shri. R Kumarasamy (DIN: 00046090), Non executive director retiring by rotation, being eligible offers himself for reappointment. 3. Shri. Chinnusamy Devarajan (DIN: 00109836) who meets the criteria of Independence as provided under Section 149(6) of the Companies Act, 2013 is appointed as Independent Director. 4. Shri. Marutha Gounder Chinnayan (DIN: 01497482) who meets the criteria of Independence as provided under Section 149(6) of the Companies Act, 2013 is appointed as Independent Director. 5. Dr. L.M. Ramakrishnan (DIN: 00001978) who meets the criteria of Independence as provided under Section 149(6) of the Companies Act, 2013 is appointed as Independent Director. FIXED DEPOSITS The Company has not accepted deposits from the public during year under review. CEO/CFO CERTIFICATION In compliance with the requirements of Clause 49 of the listing agreement entered into with the Stock Exchanges, the Managing Director has submitted to the Board a certificate relating to financial statements and other matters as envisaged in the said clause. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to the Directors' Responsibility Statement, it is hereby confirmed: i) That in the preparation of the accounts for the financial year ended March 31, 2014, the applicable accounting standards have generally been followed except for small deviations as explained in the Notes on accounts. ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 and of the profit of the Company forthe year under review. iii) That the Directors have taken proper and sufficient care forthe maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. iv) That the Directors have prepared the accounts for the financial year ended March 31, 2014 on a going concern' basis. CORPORATE GOVERNANCE Pursuant to Clause 49 of the listing agreement a report on corporate governance is given in the section titled "Report on Corporate Governance" forming part of this Annual Report. A certified from the Auditors of the Company regarding compliance of the conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement entered into with the Stock Exchanges is attached to this report. AUDITORS M/s.N.C. Rajagopal & Co., the present statutory auditors retire at the ensuing Annual General Meeting and are eligible for reappointment u/s 224(1 B) of the Companies Act, 1956. The Company proposes to reappoint M/s. N. C. Rajagopal & Co., Chartered Accountants as Statutory Auditors of the company from the conclusion of the ensuing Annual General Meeting up to the conclusion of the next Annual General Meeting of the Company. In respect of the observations made by the Auditors in their report, your Directors wish to state that the respective notes to the accounts read with relevant accounting policies are self explanatory and therefore do not call for any further comments. SECRETARIAL AUDIT A qualified Practicing Company Secretary carries out a secretarial audit on a quarterly basis to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) and the total issued and listed capital. The audit confirms that the total issued/paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialised shares held with NSDL and CDSL. SHAREHOLDER INITIATIVES Your company adheres strictly to all the statutory and other legal compliances. Your Company has been one of the first to implement any initiatives for shareholder benefit directed from SEBI. On occurrence of any event, which has a bearing on the share price or otherwise, your company intimates the stock exchanges, within the stipulated period. Your company has in place regulations for preventing and regulating insider trading and has adhered to a code of conduct and business ethics by which the shareholder is treated at par with an employee on availability of information about the company. Your company has been prompt and regular in its replies to your queries. Your company also replies within the stipulated time to all legal and statutory authorities. The total numbers of shares dematted as on 31 st March 2014 are shares which represent of the shares of the Company. DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS The Company strives to maintain healthy and harmonious relationships with all its employees. Efforts better ideas for a better plan are ongoing to build and renew the relationship with the workforce. CORPORATE SOCIAL RESPONSIBILITIES The Company always places greater importance to manage its affairs with highest levels of transparency, accountability and integrity and maintain the high standards of corporate governance on sustained basis. Your company is committed to the welfare of not only poor citizens but also to the society at large, the company has been regularly organizing various continuous social programmes, camps which provides, not only good care, but also promote awareness to the general public. During the year, the company conducted such social responsibility camps. CONSOLIDATED FINANCIAL STATEMENTS As required under Clause 32 of the listing agreement with the Stock Exchanges and in accordance with the requirements of Accounting Standard AS _21 issued by the Institute of Chartered Accountants of India, the Consolidated Financial Statements presented by your company includes the financial information of its subsidiary also. RELATED PARTY DISCLOSURES (a) Name of the Related Parties i) SKM Animal Feeds and Foods (India) Limited ii) SKM Universal Marketing Company India Limited iii) SKM Maeilanandhan (Executive Chairman) - Key Managerial Person iv) SKM Shree Shivkumar (Managing Director) - Key Managerial Person v) SKM Europe BV, Utrecht, The Netherlands (b) Description of relationship between the parties Presumption of significance influence. CAUTIONARY STATEMENT Statements in this Management Discussion and Analysis describing the health care sector's objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. ACKNOWLEDGEMENT The Directors wish to convey their appreciation to the Company's employees for the massive personal efforts as well as their collective contribution to the Company's record performance. The Directors would also like to thank the Customers, Shareholders, Bankers, and Suppliers for their continuous support given to the company and their confidence in the management. By the order of the Board SKM Shree Shivkumar Managing Director Place : Erode Date : 30.07.2014 |