CUMI leveraged its unique position across jurisdictions in the backdrop
of diverse economic realities and uncertain business conditions
I trust that yourselves and your families are doing well.
It gives me immense pleasure to connect with you in this special year
which marks the completion of 70 years of CUMI's operations.
CUMI made a humble beginning in 1954 when it commissioned its first
Abrasives facility in Tiruvottiyur, Tamil Nadu. Today it has transformed into a
multinational company with total income of H48 Billion and a market capitalisation of
about H330 Billion.
Financial Year 2023-24 continued to be a growth year and I am pleased
to share the highlights of this performance while providing a strategic outlook.
Economic conditions
The year commenced in the backdrop of a resilient global economy having
to deal with geopolitical tensions owing to conflicts in Russia-Ukraine and the Middle
East. Business conditions continued to remain volatile with an increasing level of
inflation. However, tightened monetary policies across economies resulted in inflation
moderating marginally.
There was a mixed trend as far as global economic growth was concerned.
While in United States of America, growth
strengthened as the year progressed, there was a slowdown leading to a
recession in most European countries. Besides, the global supply chain disruption
intensified owing to the Red sea crisis. While the global baseline forecast is expected to
continue growing in 2024 and 2025, it will continue to be moderate.
India remained a bright spot in an otherwise subdued global economy. In
the last ten years, India moved from the tenth largest economy to the fifth largest. The
country is now being seen as one with good potential backed by the ability to perform. The
country's consistent growth in excess of 7% in the last few years, the pandemic and
geopolitical conflicts notwithstanding, demonstrated its resilience to rebound and grow
faster, supported by increasing domestic consumption, policy reforms, infrastructure
investment and enhanced exports.
Performance
CUMI leveraged its unique position across jurisdictions in the backdrop
of diverse
economic realities and uncertain business conditions. This resulted in
a consolidated revenue (from sales) of H46 Billion and a profit after tax (PAT) of H4.6
Billion. While revenue growth remained flat, profitability grew 11.4%. The flat revenue
growth was mostly on account of the currency translation following the depreciation of the
Russian Rouble rather than a direct drop in operational revenues.
The Russian subsidiary Volzkshy Abrasive Works (VAW) grew 20.4% in
Rouble terms, which, when translated into H, resulted in a de-growth of 9.5%. That
impacted consolidated revenues. The Company's standalone revenue registered a 5% growth to
H26 Billion. In terms of profitability, the various initiatives undertaken during the
previous years resulted in a 6% growth to H3.5 Billion at the standalone level.
The capital expenditure programmes were aligned with the business plan.
In the background of uncertain global business conditions, the Company made a capital
expenditure of H2.2 Billion.
During FY 2023-24, under Mr. Sridharan Rangarajan's Managing
Directorship, the Company outlined a long-term 2030 strategic road map towards
transformational growth. The businesses, after preparation and deliberation, identified
strategic growth areas and exhaustive elaborate work programmes which are being structured
as multiyear plans. With this in view, the Board of Directors have recommended a final
dividend of H2.50 per share, which, together with the interim dividend of H1.50 per share
paid in February 2024, will aggregate into a total dividend of H4 per share, higher than
the dividend in the previous year.
While the Board's report forming a part of the Annual report will
provide a deeper review of the business performance, the highlights are as follows
Abrasives
Consolidated revenues grew 2.7% over the previous year and the
standalone revenues grew 4%. The overall performance of the business remained sound
considering that in the previous year this business had an exponential growth on account
of the inclusion of revenues from the newly acquired subsidiaries in Germany - Rhodius and
Awuko that created a higher revenue base. The pricing pressure in certain business
segments like retail, owing to low priced imports also impacted the revenues and margins.
VAW's Abrasives business performed very well with good growth but in this case as well,
the exchange rate conversion resulted in reporting a de- growth in the consolidated
financial terms.
The business's profitability at the PBIT level grew substantially by
73% to H1.8 Billion owing to an improved standalone performance on the back of better
product mix, softening of input costs, enhanced operational efficiencies, better
realisations and lower losses in Rhodius and Awuko. The growth was well supported by a
very good performance by CUMI America Inc., the USA subsidiary which turned debt-free last
year.
I am happy to share that Rhodius and Awuko, the Company's newly
acquired entities are performing better operationally. These entities are now being led by
a new energetic leadership team and they have managed to reduce their losses when compared
with the previous year. This is a commendable achievement considering the recessionary
trend and severe price competition in Europe. Rhodius reported an operating profit and
losses in Awuko have reduced. Following the implementation of a meticulous business
strategy, these entities in Germany which have improved their performance are on track to
better their performance and are well aligned with the CUMI's growth plans in the years to
come.
Though the Agri-related products of Sterling Abrasives Limited
continued to receive better reception resulting in a marginal growth, higher depreciation
in the newly established plant, lower exports and supply delays due to shifting of plant
operations, impacted profitability. The subsidiary is gearing up to enhance its
operational efficiencies and revenues.
Wendt (India) Ltd., our associate, grew 8%, riding on the higher sales
to major
The Abrasives business is a very significant segment for CUMI Group.
With India aspiring to become the third largest economy and the continuing thrust on
infrastructure spending, the Company envisages high growth in Abrasives by leveraging its
existing market position and optimising Group synergies.
Electrominerals
The standalone Electrominerals business grew about 6% while the
consolidated business de-grew 5%. The India business was impacted by price pressure owing
to low price imports. While there was a significant volume increase, revenues were
impacted by severe price competition across many products from low-priced imports into
India. The depreciation of the Rouble resulted in a lower growth in Indian rupees while in
Rouble terms VAW grew 20%.
Consolidated revenues grew 2.7% over the previous year and the
standalone revenues grew 4%. The overall performance of the business remained sound
considering that in the previous year this business had an exponential growth on account
of the inclusion of revenues from the newly acquired subsidiaries in Germany - Rhodius and
Awuko that created a higher revenue base.
user industries like auto, auto ancillaries, steel, bearings, ceramics,
cutting tools and engineering etc. Exports were impacted by geopolitical uncertainties and
a global recession across most countries. The change in product mix and increasing costs
marginally impacted profitability.
The operations of CUMI Abrasives and Ceramics Company Limited in China
and CUMI Middle East remained downsized. While the Board of the China subsidiary has
decided to wind down operations and de-register the entity, the Board of CUMI Middle East
is evaluating options and customers continue to be serviced through alternative business
models.
The performance of the South African subsidiary Foskor Zirconia Pty
Limited, which had reported a turnaround in FY 2022-23, was adversely impacted resulting
in losses due to pricing pressures and lower offtake from its customers.
Though FY 2023-24 was not conducive in terms of reportable financial
performance, the business has done very well to maintain momentum while concurrently
initiating several innovative projects with new age materials like Graphene and High
purity Silicon Carbide, among others. The business prioritised sustainability and has been
a pioneer within the CUMI Group in driving green initiatives for a cleaner and better
future. These initiatives and new projects
offer a bright future for the Electrominerals business.
Ceramics
The Ceramics business comprises Industrial Ceramics and Refractories
& Composites.
It grew 6% during the year under review. Refractory, Wear Ceramics and
Metallised Cylinder businesses grew 19% during the year but was marked by de-growth in
engineered ceramics, while the overall ceramics segment on a standalone basis grew 5.6%.
The consolidated growth was mainly led by a very good performance of subsidiaries in
Australia and USA. The Australian subsidiary, CUMI Australia Pty Ltd., engaged in the
lined equipment business delivered record revenues for the second successive year.
Being highly customer-centric, the Ceramics business has strategically
selected clear increase during the year under review. However, a significant increase in
gas prices and other generating & transmission charges increased losses during the
year. The enhanced diversification into the solar business has helped the subsidiary
sustain operations in FY 24.
Net Access India Limited, the IT subsidiary, marginally de-grew in
sales and profitability owing to changes in client and product mix.
PLUSS Advanced Technologies Limited (PLUSS), the subsidiary
specialising in phase change materials and specialty polymers did well in enhancing its
revenue base as compared to the previous year but the price corrections in the Polymers
market resulted in lower sales realisation downwards and this along with the accounting
treatment for acquisition resulted in lower profitability. However, the Netherlands
subsidiary of PLUSS has been able to capitalise on its
CUMI was recognised yet again as a 'Best Managed Companies' by Deloitte
in 2023 after undergoing rigorous evaluation across aspects including strategy development
& deployment, capability & innovation, culture & commitment as well as
governance & financial performance. This achievement is testimony to our efforts in
institution building.
growth opportunities in the area of semi- conductors, electric
vehicles, aerospace & defence, and green energy, which could aid in generating
substantial growth. A growing presence in these spaces by leveraging existing technologies
and relationships will pave the way for newer opportunities.
The refractory business will focus on opportunities in India for
monolithic refractories and also growth in export -driven sectors like glass, non-ferrous
and carbon black.
Others
Southern Energy Development Corporation Limited, the gas-based power
generation subsidiary, recorded a marginal sales efforts in establishing customer networks
overseas and this will aid the subsidiary to grow profitably in future.
Murugappa Morgan Thermal Ceramics Limited (MMTCL) and CIRIA India
Limited (Ciria) , joint ventures, delivered consolidated level growth in terms of
profitability. While MMTCL recorded double- digit revenue growth strengthened by the
distribution business and enhanced project orders, Ciria revenues marginally de-grew owing
to a reduction in service income while high margin projects execution increased
profitability.
All the CUMI Group subsidiaries and associate companies are involved in
the long-term strategy development. The deployment of the plans and projects emanating
from this exercise are expected to optimise performance in the years to come.
I am pleased to share with you the highlights in our people
capabilities, sustainability initiatives and recognitions (even as a detailed summary is
available elsewhere in the Annual Report).
Accolades
CUMI was recognised yet again as a 'Best Managed Companies' by Deloitte
in 2023 after undergoing rigorous evaluation across aspects including strategy development
& deployment, capability & innovation, culture & commitment as well as
governance & financial performance . This achievement is testimony to our efforts in
institution building.
From a safety and sustainability perspective, the Abrasives business
received the accredited oSa certification for its Maraimalainagar and Uttarakhand plants.
The business also won the Manufacturing Champion Award for total cost management. The
Ceramics business received the Industry Disruptor Award from Autodesk Imagine. Other
awards and accolades are listed in the Annual Report.
I must emphasise that safety and sustainability are given importance
equal to financial growth parameters at the Company, making it possible to deliver
sustainable growth.
CSR
The Corporate Social Responsibility (CSR) initiatives continue to be
focused on health, education and skill development. Our contributions are being made in a
meaningful manner with our CSR programmes being identified and executed such that they
create an ecosystem around the areas of spend rather than remaining mere one-time grants.
Additionally, the Company has also made contributions to the Tamil Nadu
Chief Minister's Public Relief Fund to assist the state government in its rescue and
rehabilitation efforts in the aftermath of the torrential rains and consequential floods
during December 2023.
People capabilities
As the Company progresses towards its diamond jubilee milestone - 75
years, I am pleased that the institution CUMI has become is because of its people. While I
extend my gratitude to all those who helped build this institution, I wish the current
team well in their journey towards excellence.
Strategic Leadership Transitions
In August 2023, Mr. N. Ananthaseshan retired as Managing Director and
Mr. Sridharan Rangarajan took charge from him. I thank Ananth for his contribution to CUMI
for nearly four decades and wish him well in his retirement. I also welcome Sridharan who
has, as soon as taking over from Ananth, propelled the teams into thinking strategically
beyond the present to build a greater future and laying down the roadmap for the same.
The Long-Term Strategy initiative 2030, which emanated from the
operating teams culminated into a cross-functional, multi- geography programme with
participants from across all the businesses, functions, subsidiaries and associate
companies. Diligent planning, execution perfection with adaptation, rigorous reviews and
ability to course correct facilitated by optimum resource allocation will definitely
transform CUMI into a high performing organisation that it aspires to be.
Building a safety culture is a priority area identified by the Board. I
commend the teams for reviewing the organisational structure and putting in place a safety
organisation which is now headed by Mr. R Rammohan, who brings with him richly diverse EHS
experience across industries.
Mr. P Padmanabhan, who was the Chief Financial Officer, has become the
Global -Taxation Head and Chief Risk Officer;
Mr. Sushil Bendale took charge as Chief Financial Officer from May
2024. In a rapidly
changing and technology-driven world, it will be increasingly essential
to upgrade IT capabilities; relevantly, Mr. Ajit Kolhe has joined as its the IT - Head and
will drive the digital initiatives essential for enabling for the futuristic growth
envisaged.
In May 2024, for leveraging the Group synergies as a part of the
Long-term strategy, Mr. Ninad Gadgil, who was heading the Abrasives Business, was
transferred to Wendt (India) Limited as its CEO & Executive Director; Mr. C Srikanth,
who was CEO & Executive Director of Wendt (India) moved back to head the Abrasives
business at CUMI.
Mr. Bhaskaran Kannun, who took charge of the Human Resources function
in 2020 during a challenging pandemic, will retire in August 2024. We thank him for his
dedicated services.
Mr. Shyam C Raman, currently heading the Group-Human Resources function
will take over as Chief Human Resources Officer from 1st September 2024. With
his vast experience and expertise, we envisage developing competencies and capabilities
for delivering the present and preparing for the future.
In our overseas operations, we have Mr. Adrian Gansen, who joined us as
the Chief Operating Officer, and Mr. Markus Massa as the Finance Head for the Rhodius and
Awuko businesses. In Foskor Zirconia, we have Mr. Gerrit Van Wyk leading the operations
along with Mr. Gideon Van Rhyn.
We believe these organisational strengthening initiatives will augur
favourably for CUMI and I welcome new members to the CUMI organisation. The leadership
teams of the subsidiaries and associates -existing and new - played a significant role not
only in the operating performance but in strengthening teams and processes across all
operations.
Board Composition Updates
I thank every member of the Board for their unstinted support and
guidance to me personally as well as to the management team. Each of them have been very
generous with their time and engagement. Their enthusiasm and active participation in the
Long-Term Strategy programme was inspiring not only for the teams but to me as well. The
Board has been very encouraging in pushing the teams beyond their limits within the
boundaries of governance and I take this opportunity to thank them profusely.
We will also be seeing some changes in the Board composition during the
year 2024-25. Mr. Sanjay Jayavarthanavelu, Mr. Aroon Raman at the close of 31st
July 2024 and Mrs Soundara Kumar at the close of 2nd August 2024 would be
retiring from the Board having completed their respective term of office as Independent
Directors. We value their significant contribution to the Company. I extend my heartfelt
thanks to them for having served on our Board with deep involvement and care. They have
been part of many milestones the Company has achieved, and the Management has been truly
enriched by their wisdom, guidance, and encouragement. In view of their impending
retirement, the Board at its meeting held on 24th June 2024 has recommended the
induction of Mr. Sriram Viji, Mrs. Usha Rajeev and Mr. Muthu Murugappan to the Board of
the Company. The proposed Directors have excellent credentials more fully detailed in the
notice convening the annual general meeting. Their association would immensely benefit the
Company in its transformational growth phase, and I look forward to working with them.
I thank every customer, supplier, vendor, banker, regulatory agency,
legal advisor, financial and tax advisor, consultant, and you - our shareholder, for your
unstinted support and encouragement over seven decades of our journey with GRIT, GLORY and
GROWTH.
With warm regards,