BARAK VALLEY CEMENTS LIMITED
ANNUAL REPORT 2006-2007
CHAIRMAN'S REPORT
Dear Shareholders,
It gives me immense pleasure to present the Eighth Annual Report of the
Company for the year ending 31st March, 2007.
Outlook for Cement
The cement industry is experiencing a boom on account of the overall growth
of the Indian economy. The demand for cement, being a derived demand,
depends primarily on the industrial activity, real estate business,
construction activity, and investment in the infrastructure sector. India
is presently passing through a positive trend of growth on all these fronts
and hence the cement market is flourishing like never before. Indian cement
industry is globally competitive because the industry has witnessed healthy
trends such as application of cost reduction measures and continuous
technology upgradation. As observed by Fitch Ratings, a reputed global
rating agency has commented that cement demand in India is expected to grow
at 10% annually on account of rapid growth in housing projects,
infrastructure activities and corporate capital expenditures. Indian Cement
Industry is presently contributing approximately 6% of overall global
production. The recent boom in Cement Sector has worked wonders for the
cement manufacturing companies with the maximum capacity utilization for
the first time in January, 2007. The consumption of cement is also likely
to exceed 150 million tonne mark annually for the first time.
Backed by the need for mammoth infrastructure development in the country
the outlook of the Cement Industry remains buoyant. The cement industry has
outpaced itself attracting top class cement companies in the country
ramping up production capacity due to the recent boom in Housing Sector and
increased activity in Infrastructure Development by State and National
Highways and already underway National Highway Development Project (NHDP)
resulting in increased demand of cement. Besides, Government's thrust on
developing infrastructure facilities in the country by way of modernizing
airports, seaports, railway stations etc. will further boost demand for the
cement at national as well as regional levels.
Cement Industry -Salient Trends
The Indian cement industry is the second largest producer of quality
cement, which meets global standards. The cement industry at present
comprises of 130 large cement plants with an installed capacity of 156.26
million tones and more than 300 mini cement plants with an estimated
capacity of 11.10 million tonnes making a total installed capacity of
167.36 million tonnes. Due to the on going expansion plans of various
companies; the installed capacity is likely to be increased up to 189
million tones capacity by the end of September 2007.
The Cement Industry has made tremendous strides in technological up
gradation and assimilation of latest technology. Presently, 93% of total
capacity in industry is based on modern and environment friendly dry
process technology and only 7% is based on old wet and semi-dry process
technology.
Outlook for National Economy
The Cement Industry is presently contributing approximately 1.3% of GDP and
employs over 0.14 million people apart from being a significant contributor
to the Central and State Government revenues through excise and sales tax.
Cement production in India has grown significantly over past three decades.
It is further expected to witness strong production and consumption growth
of 10% during FY 2008 on account of befitting co-relation between GDP and
increased activity in construction sector. Future Cement demand is likely
to grow up in India due to increased spending on road and housing projects.
Fundamentals of demand also look bright and cement demand in medium term is
expected to grow by around 9%.
Outlook for Cement Industry vis-a-vis BVCL in North East Region
Your company is one of the major Cement producers in North -East region and
India has vast potential for growth and expansion plans in this region. The
Central Government has announced several incentives in the North Eastern
region more particularly related to special accelerated road development
programs at an estimated cost of Rs 46.18 billion. The Government has also
decided to develop 1000 kms of access- controlled expressways. The North
East Industrial and Investment Promotion Policy, 2007(NEIIPP, 2007)
announced by the Government of India is also a step further towards
developing the North-east areas. Government has declared various exemptions
like income-tax exemption, excise duty exemption, capital investment
subsidy, and interest subsidy for a further period of ten years. The
various incentives offered by the Central and State Government, increasing
demand from infrastructure projects and industrial/commercial ventures will
prove to be quite in favour and interest of the company in the coming near
future.
Cement Production and Sales/ Financial Review
It is indeed a matter of great satisfaction that your Company has been able
to keep moving forward and surpass the targets set for itself. Efforts both
on improving the efficiency parameters and cost compression on one hand and
maximizing the production and sales realization on the other have been the
mainstay of the Company's strategy. It is satisfying that the Company has
made substantial progress on both the fronts. Reaping full benefits of the
Company's strategy of focusing on its business, it has achieved 104.91%
capacity utilization during the accounting year 2006-07, with achieving
sales target of 1,59,545 tonnes. The turnover of the Company increased by
39.90 % and its Profit before Interest, Depreciation and Tax grew by a
whopping 26% to Rs. 2405.79 lakhs as against Rs. 1909.13 lakhs in the
previous year.
Future Growth Plans
Progress made by the Company on its on-going projects for expansion of the
plant capacity as well as setting up of a grinding unit by its wholly owned
subsidiary company (CIL), has been fairly satisfactory. The Grinding unit
in CIL has already commenced its production from the month of April 2007
and as far as the expansion project of BVCL is concerned it is expected to
commence its production from the month of October 2007 onwards. The
Company's other ambitious project of setting up of a 6 MW Biomass based
Captive Power Plant in its wholly owned subsidiary company (BEPL) is also
progressing well. It is expected that the Power Plant will be commissioned
by September 2007. The commissioning of this project would mark the end of
Company's dependence on the power from the State Grid, which besides being
very expensive suffers from inconsistent quality. The comparative cheaper
cost of the captive power generation would further improve the bottom line
of the Company.
Another Project of 800 TPD Crusher unit at Meghalaya, in its subsidiary
company i.e. Meghalaya Minerals and Mines Limited is also doing well and
this Plant is expected to start its commercial production by the end of
July 2007.
Concerns for Cement Industry
Recently, the Government of India has announced the scrapping of the
Counter veiling Duty (CVD) of 16% and Special Additional Duty (SAD) of 4%
on the imports of Cement to India. However, freight costs and port
infrastructure were all factors in deciding imports of this high volume,
low value commodity. The lowering of the import duty is unlikely to mount
much pressure on the cement companies, as the cement prices are unlikely to
soften since lower import duty has no material impact on the domestic
industry.
Acknowledgements
I must not forget to take out some time for thanks giving firstly to
workers and staff of the company at all levels for their unstinting hard
labour and support and secondly to all those who are directly or indirectly
have extended their co-operation and support to the company including
government agencies, banks, shareholders, dealers etc.
I greatly value the collective efforts of entire BVCL team and the
contribution and involvement of my colleagues on Board in achieving the
present corporate shape and status of the company.
For Barak Valley Cements Limited
Sd/-
Bijay Kumar Garodia
Chairman