TAMILNADU PETROPRODUCTS LIMITED
ANNUAL REPORT 2005-2006
CHAIRMAN'S REPORT
Ladies and Gentlemen,
It gives me great pleasure to welcome you ail to the 21st Annual General
Meeting of your Company. The Annual Report of the Company along with the
Director's Report and Audited Accounts for the year ended 31st March 2006
highlighting the various events and future plans have already been
circulated. With your permission, I would like to take them as read.
INDIAN ECONOMY:
The country has been witnessing a healthy growth for the past three years
and the robust growth of GDP at 8.4% during 2005-06 has put the economy on
a higher growth trajectory. Industrial growth is driven by robust
performances from manufacturing and construction sectors. Within industry,
the manufacturing growth has accelerated steadily from 7.1 per cent in
2003-04 to 0.4 per cent in 2005-06.
The overall stance of the monetary policy of RBI for the year 2006-07,
barring the emergence of any adverse and unexpected development in the
various sectors of the economy, will be:
* To ensure a monetary and interest rate environment that enables
continuation of growth momentum while emphasizing the price stability with
a view to anchoring inflation.
* To reinforce focus on credit quality and financial market conditions to
support export and investment demand in the economy.
Hence, there is a general expectation that GDP will sustain at 8% growth
during 2006-07.
PERFORMANCE OF THE COMPANY:
As you are aware the price of oil has been on the upswing during the year
2005-06 ranging between 48 to 63 US $ per barrel. The high cost of raw
materials and energy had therefore greatly affected the profitability. It
has been a year of unfavourable scenario making it difficult for the
Company to rebound and improve the performance. Various measures taken have
considerably stemmed the decline in profit level.
The overall performance of both ECH and Chlor Alkali units yielded good
results while there has been a fall in the performance of LAB unit. The
turnover of LAB unit increased due to higher selling price despite a
marginal reduction in production compared to last year. During the year,
highest production level of ECH was achieved surpassing the installed
capacity level of 10,000 MTs. The Joint Venture Company, M/s. Petro
Araldite Pvt. Ltd. continues to be the major customer.
The turnover of ECH also increased due to surge in global ECH prices. The
turnover of Chlor Alkali division was higher compared to last year though
the realization has been on the reducing trend.
The debt restructuring efforts also helped considerably to reduce interest
expenditure despite marginal hardening of interest rates.
BUSINESS OUTLOOK:
The excess capacity vis-a-vis demand for the Company's main product i.e.,
LAB, in India coupled with the continuous rise in oil prices leading to
higher input and energy cost, has resulted in thinning down of the overall
margins of the business. In order to address these issues the Company has
embarked on several strategies.
The Company, as a risk mitigation strategy, is planning to reduce the
energy cost by going in for coal fired power plant subject to necessary
approvals, in the place of existing DG sets. This initiative would reduce
the dependence on Fuel oil, the price of which is related to volatile oil
prices.
The overseas project in Singapore to manufacture Normal Paraffin is
progressing well. Once the project is commissioned, the unit will make
available a cost competitive Normal paraffin as feed stock to our Indian
operations.
Your Company has resorted to Commodity Hedging to insulate against rising
prices of raw materials.
The future outlook for LAB market is however encouraging due to anticipated
higher growth in demand for detergents since the life style in Indian
economy is undergoing a sea change. Many new detergent products are being
launched and the market is witnessing a drastic change in the consumption
pattern and volume. This healthy growth is expected to result in a
promising future for the domestic LAB Industry.
There has been an increased focus on infrastructure projects in India.
Hence with a growth poised in Resin and Basic metal industries such as
Aluminium and Copper, the business outlook for ECH and Caustic Soda is
expected to improve further. Given this background, the Company has
completed the feasibility study to expand further the Chlor-alkali business
by 50 MTs per day.
The Board of Directors are confident that the Management with its
professional approach wall stay focused to implement successfully the
various action plans outlined to regain the lost ground. It is heartening
to note that during August/September 2006, the oil price has been declining
and this augurs well for an improved performance of your company.
DIVIDEND:
The profit after tax for the year 2005-06 was only Rs.2.04 crores. The
Board of Directors with a view to reward the shareholders and maintain the
track record of declaring dividend continuously have recommended payment of
dividend of 10% on the Equity Share Capital.
ACKNOWLEDGEMENT:
I take this opportunity to thank the Central and State Governments,
Financial Institutions, Banks, Insurance Companies, esteemed shareholders,
suppliers and customers for the support extended by them to your Company. I
thank all my colleagues on the Board for their continued support and
contribution. I also wish to express my appreciation to all the employees
for the good teamwork and professionalism exhibited besides the
enthusiastic contribution during the year.
I seek your continued support to manage the affairs of the Company to
benefit all the stakeholders.
Thank you.
Source: 21st AGM D. Rajendran
Dated : 26th September, 2006 Chairman