Your Directors have pleasure in presenting the Annual Report with the audited Accounts of your Company, for the financial year ended 31st March 2012.
Review of Performance
The Board is pleased to report that during the year under review your Company has earned highest ever sales revenue of Rs.120289 lakhs as against Rs.106895 lakhs earned in the previous year. However, the profit after tax was lower by 5.15% primarily on account of significant increase in cost of materials, employee expenses and provision for diminution in value of investment, an exceptional item.
Your Directors are pleased to recommend for approval of the shareholders a dividend of Rs. 6/- per equity share on 10,94,55,735 fully paid up equity shares of Rs.5/- each being 120% on the paid up value of the equity shares of the Company for the year ended 31st March 2012 as against 100% (Rs. 5/- per share) paid for the earlier year.
Review of Operations
During the financial year, your Company produced 793 lakh kgs tea as compared to 749 lakh kgs in the previous year. Favourable weather conditions spurred growth between April and October 2011. From November 2011 onwards the weather in the North Bank of Assam and Dooars became dry leading to an early closure of the season and a reduced harvest in March 2012.
The Uprooting and Replanting activity of your Company has further improved. The percentage of tea under fifty years is approximately 75% of the total area. This has contributed to an increase in an average yield of estates, which is higher than the Industry average. A good standard of nurseries with the required Clonal Blend are being maintained.
The Company's focus has always been to produce quality teas, which commanded a premium both in the domestic and international market. As part of an upgradation and modernisation programme of factories withering capacity was increased on four estates. Thirty four Rotorvane feeders, fifteen Rotorvanes, fourteen CTC machines, twenty CFM's, twelve VFBD's, four coal stoves, six boilers, sixteen milling machines, five lathe machines were installed in various factories. In some factories extension of building was undertaken to accommodate additional sorting machinery. To improve and monitor quality, six Colour Sorters for Orthodox Sorting and six Sinar Moisture Meters were purchased.
To augment the standby generating capacity eight diesel generating sets and two gas generating sets were installed. Six new transformers were also installed. For undertaking river embankment work bordering tea estates and deepening outlet drains four new JCB Excavators were purchased. To facilitate weighing of leaf, fertilisers, ration among others six new weighbridges were installed. 44 new plucking machines are being put on trial. With drought prevalent annually, additional irrigation equipment was augmented on 14 estates. Transport fleet was upgraded on estates with the deployment of 58 new tractors.
The Company now has 45 Hazard Analysis Critical Control Point (HACCP) certified factories. Your Company also has 4 estates certified as 'Fairtrade' and 14 estates certified as "Rainforest Alliance." The Nilpur Blending Unit is a HACCP Certified unit.
The average price realisation for the Company's tea for the year was Rs.150/- which is higher than the North Indian auction average of Rs.117/-.
The Company saw a total export quantum of 236 lakh kgs. in 2011-12 with an overall export turnover of over Rs. 40134 lakhs. Favourable feedback was received from the buyers both in terms of quality and deliveries.
Subsidiary Companies and Consolidated Financial Statements
The Company has one wholly owned subsidiary namely, Borelli Tea Holdings Limited, U.K. (Borelli) and six step down subsidiaries. Borelli is inter alia engaged in the business of investing funds in various Companies engaged in tea production, marketing and investment activities. As on 31st March 2012 Borelli had the following subsidiaries in different countries:-
(i) Phu Ben Tea Company Limited, Vietnam - controlling stake of Borelli being 100%
(ii) Rwenzori Tea Investments Limited ('Rwenzori'), Uganda - controlling stake of Borelli being 100%
(iii) McLeod Russel Uganda Limited - 100% subsidiary of Rwenzori
(iv) Olyana Tea Holdings LLC ('Olyana'), USA -controlling stake of Borelli being 95%
(v) Gisovu Tea Company Limited, Rwanda - controlling stake of Borelli being 60%
(vi) McLeod Russel Middle East DMCC - controlling stake of Borelli being 100%
In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. A Statement containing brief financial details of the subsidiary companies is included in the Annual Report in the Chapter containing Consolidated Financial Statements. Olyana, for not having any business, is in the process of being dissolved. The performance of the major subsidiaries are summarised below for your information.
As required under the Listing Agreement with the Stock Exchanges, Consolidated Financial Statements of the Company, its seven Subsidiaries and one Associate Company namely D1 Williamson Magor Bio Fuel Limited prepared in accordance with the applicable Accounting Standards issued by The Institute of Chartered Accountants of India are attached.
Borelli Tea Holdings Limited
Borelli Tea Holdings Limited has invested in its Subsidiaries in Vietnam, Uganda, Rwanda, USA and Dubai. During the year ended 31st March 2012, Borelli earned a net profit equivalent to Indian Rs. 2937 lakhs and has recommended payment of dividend at the rate of 200% on its equity capital held by your Company.
Phu Ben Tea Company Limited
Phu Ben Tea Company Limited (Phu Ben) during the financial year of the Company ended 31st December 2011 earned a net profit equivalent to Indian Rs. 15 lakhs on its sales turnover equivalent to Rs. 4366 lakhs.
Phu Ben achieved a total production of 54 lakh kgs. Sales for the year was 49 lakh kgs. which was sold at an average price of USD 1.74/kg.
Yield from own plantation was pegged at 2798 Kgs/Made Tea/Hectare which was a record. Implementation of improved field and cultural practices and favourable weather conditions attributed for this improvement.
Capacity expansion by way of additional trough at Van Linh and systemisation of operational procedures at all the units were reinforced.
The Company continues to lay stress on quality control in both field and factory and adheres to GAP for plantation operational developments, along with IPM measures for Pest control.
The plantations of the Company were "Rainforest Alliance Certified" in 2011.
The Company employs 3,920 farmers, workers and staff and maintained good Industrial relations.
Phu Ben is considered to be the top most Tea Company in Vietnam and is called upon by the Provincial and Central Government authorities to impart training and partake in community development programmes along with the Local Authorities. The Company was involved by way of providing technical advice to a French Government aided AFD project to develop the fields of the local farmers.
Phu Ben was awarded for Quality and Best GMP & GAP practices by the Provincial Government at the National Tea Convention in February 2011 held at Phu Tho Province. Phu Ben was also the winner of the "Golden Leaf Award" for best Black Tea in Vietnam at the International Tea Convention held at Thai Ngyuen Province in November, 2011. In addition, awards & certificates were also received from both Central Government agencies and Provincial Authorities for Environmental Protection, contribution to the development of the Tea Industry in Vietnam and Phu Ben was cited as a Model Business Venture.
McLeod Russel Uganda Limited
During the financial year of the Company ended 31st December 2011 McLeod Russel Uganda Limited (MRUL) earned a post tax profit equivalent to Indian Rs.7949 lakhs as against Rs. 2504 lakhs in the year 2010. This was achieved due to higher price realisation from USD 1.84 per kg. in 2010 to USD 1.95 per kg. in 2011, an increase of 11 cents per kg. During the year the Company also received Income Tax exemption for a period of ten years with effect from 2007.
Production in 2011 was lower at 163 lakh kgs. compared to 168 lakh kgs. in 2010, due to insufficient rainfall at the beginning of the year. However, the increase in prices compensated for the reduction in production. The Company declared dividend equivalent to Indian Rs.2301 lakhs during the year as against Rs.1967 lakhs in 2010.
Weather conditions were unfavorable at the commencement of the year with rainfall receding by December 2010 and becoming active only in end March 2011. As a consequence 1st quarter factory crop was in deficit against previous year by 38%. However, with resumption followed by normal rainfall levels, the Company was able to recoup and the year finished with factory deficit of 4% only against an all-time record in 2010.
Extension Tea planting was strengthened. This activity was carried out early in the year and minimal vacancy was recorded 12 months after planting. Eucalyptus extension was carried out. A Vegetative Propagation Unit for fuel wood trees was established and 4 new clones were generated at commercial level. Single Operator Harvesters were deployed at all locations and area under mechanical harvesting registered an increase to 56%. All fields were harvested on shorter rounds and no crop control was resorted to.
Factory expansion to 3 lines and increase of Withering capacity was completed at Mwenge and Bugambe. The renovated factories now have capacity to complete manufacture of peak season volumes within 16 hours. Private sales quantum increased and new markets were accessed in the Middle East. The Company achieved ISO 22000 FSMS certification and maintained RA standards.
Construction of resident workers housing (6 units) and infrastructure was completed on schedule and to high standards. A water supply project was commenced at Mwenge to provide filtered potable water for all residents. Under the Company's commitment to CSR and community upliftment, 2 primary school blocks were constructed and handed over to local Government authority.
The Company's commitment to, and success with, USAID sponsored Health in the Work-Place Program was acknowledged by a visit of Ms. Lois Quam, Executive Director, US Global Health Initiative accompanied by H. E. Jerry Lanier the US Ambassador to Uganda. MRUL remained the country's largest tea producer and exporter. Presidential, Parliamentary and Local Government election took place nation-wide in February/March 2011, during which time estates remained calm and orderly. Good industrial relations were maintained and strengthened by the Company's initiatives in the fields of sport and culture.
Gisovu Tea Company Limited
The Management of Gisovu Tea Company Limited (Gisovu) Rwanda was taken over by Borelli on 24th February 2011. During the year, formalities relating to acquisition of 60% shares of Gisovu from the Government of Rwanda were completed. The Company earned a post tax profit equivalent to Indian Rs.1074 lakhs from the date of acquisition till end of the year.
Improvement of cultivation practice coupled with favorable weather, Gisovu achieved record production of 19 lakh kgs of made tea. An increase of 15.09% compared with the previous highest crop ever recorded in Gisovu.
Gisovu continued to manufacture teas of the highest standard in East Africa and realised the highest African average sales price of USD 3.39 against the previous year's price of USD 3.16. Rwandan average (auction) for the year of operation was USD 2.71. The Company was acclaimed and awarded the prize for the best sale samples in East Africa, an award presented by President Kibaki of Kenya at the East African Tea Conference held in Mombasa.
The Factory expansion project was sanctioned in December. Machines have been ordered and will reach the Estate shortly.
Gisovu was 'Rainforest Alliance' certified during the year. It is already IS0 9001 certified.
Gisovu has endeavored to maintain CSR activities in its area of operation. Removal of child labour was accomplished and these children are now either in vocational training or schools supported by the Company. The Company has also been instrumental in arranging educational material in the local sector schools and has distributed these free of cost. Arrangements have also been made for teaching material for vocational courses like Carpentry and Masonry kits.
Good Industrial relations with the local Cooperatives were maintained.
McLeod Russel Middle East DMCC
McLeod Russel Middle East DMCC (MRME) was incorporated on 9th May 2011 in Dubai, UAE as a wholly owned subsidiary of Borelli. The principal business of the Company is trading in tea. During the period ended 31st March 2012, the Company incurred a net loss equivalent to Indian Rs. 99 lakhs, being the first year of its operations. The Company commenced its trading business from the second half of the financial year. MRME is expected to perform better during the financial year 2012-13.
D1 Williamson Magor Bio Fuel Limited
D1 Williamson Magor Bio Fuel Limited (D1WML) was incorporated under a 50:50 joint venture agreement between Williamson Magor & Co. Limited (WML) and D1 Oils Trading Ltd. UK to facilitate development of Jatropha Plantation under contract farming arrangements for production of bio diesel from Jatropha oilseeds. Being an associate of WML your Company presently holds 34.30% of the equity capital of D1WML.
The plantation developed by the Company under contract farming arrangements has been undergoing through initial gestation period at various levels of maturity. The farmers in North East are finding it difficult to maintain the plantation with excessive weed growth. In view of this the Company has scaled down the level of activities in North East and abandoned the plantation in Tripura. The plantation in Jharkhand, though has delayed growth is gradually becoming productive and there has been notable increase in oilseed harvest. The Company has focused its operation in Jharkhand. The longer gestation period of Jatropha plantation and the poor yield as compared to initial indication has been a global phenomenon for which all companies are adversely affected.
In view of this the Company has decided to process Jatropha Oilseed on third party installation and defer the investment in manufacturing facilities until the volume increases for commercial processing. Accordingly, the Company has surrendered the land taken on lease from Assam Industrial Development Corporation, for factory in Industrial Growth Centre, Balipara, Assam. The Company has reduced its overhead cost to the present scale of operation to manage the plantation and the working capital with the fund available in the Company.
Corporate Social Responsibility
The philosophy of your Company towards fair governance going hand-in-hand with social responsibilities is deeply embedded in its day to day working. The Company has, over the years, successfully formulated a methodology aimed towards improving the environment, which surround the units of the Company and thereby enriching the society.
Your Company has continued with and improved upon the already commendable standard of medical care to the families of its employees, as also to the population resident around its tea estates. The Company also conducts out-reach programmes to cover the medical needs of certain remote areas accessible from its tea estates. The Company continues to render assistance both monetarily and with man power, to hold regular camps for eye-related needs. Your Company received immense support from Sri Sankardeva Nethralaya and District Health Departments in this initiative. There were around 1,000 persons who underwent Cataract Operation. About 20 persons were also treated under 'Operation Smile' for their Cleft Lip. Your Company continues to support the Moran Blind School as in previous years. Your Company is, in a small way, also assisting an organisation which is providing service in the form of education and health-care for children who are challenged with hearing problems.
The tea estates of the Company have Schools of varying capacities, both in terms of numbers and quality. This is an endeavour which your Company tries to improve upon ceaselessly. It also assists Schools in and around its business units.
The Williamson Magor Education Trust was formed with the purpose of advancement of Education in India. This broad objective encompassed the intent to assist with scholarships, stipends and other aid, and to assist and maintain Schools, Colleges, Hostels established by the Trust. Also embedded in the objectives, was assistance towards maintenance of libraries, reading rooms and the advancement of Literature in general. Over the years, the Trust with generous donations from your Company has awarded over one hundred scholarships to well-deserving students selected by an autonomous Expert Committee and Selection Board. These students have since moved ahead in life, and have been able to improve their standard of living as also of people around them. Your Company regularly provides financial and other assistance to the Trust to enable it to achieve its noble objectives. It is with this philosophy that Assam Valley School was formed by the Trust several years ago. The School is now rated amongst the top residential Schools in India, and the first in the North East with Pan-Indian recognition.
Each year under the aegis of Assam Valley Literary Award, the Trust confers upon an eminent living Assamese litterateur, an award consisting of a Trophy, citation and a cash award. The Annual Awards function, which is organised by your Company in association with the Trust, is regarded as one of the important social events of Assam. This year the award was bestowed upon Shrimati Purobi Bormudoi a prominent writer with large readership in Assam. The selection, as in earlier years, was made by a completely autonomous Committee of Assam's most famous writers and poets. A truly notable initiative, The Assam Valley Literary Award has become one of the most prestigious functions in Assam, attended by a cross-section of society comprising eminent litterateurs, prominent personalities, Government Officials, representatives from trade and commerce, tea industry and the press. The function is widely covered by print and electronic media.
The Company gives importance to the preservation of the natural habitat around its tea estates and engages in several programmes and initiatives to preserve the biodiversity in its surrounding areas. The Company has a commendable tree planting programme, soil preservation programme and participates in the Ethical Tea Partnership Programmes, which is a global initiative. Your Company is sensitive to the requirements of world bodies which regulate cultivation and manufacturing practices which in turn benefits the environment and thereby the society at large. The future of the world depends on preservation, and your Company exercises extreme care towards this end. A smaller but significant social measure is the Heritage conservation, which your Company has been supporting over a long period of time.
Your Company is continuing its support to the Bodo Handloom Scheme in Mangaldai which leads to gradual empowerment of women and promotion of local handicraft both at the tea estates and village level. It also supports a programme for financial assistance towards education of some under-privileged children in Kolkata, as also makes suitable contributions to a recognised Institution in Kolkata, which addresses the needs of children challenged by Cerebral Palsy. The Company has been generously contributing towards promotion of Kolkata Museum of Modern Art ('KMOMA'), a Museum of international standard being set up at Kolkata.
Since the last Report Mrs. Ramni Nirula was appointed as an Additional Director with effect from 15th September 2011. In terms of Article 120(1) of the Articles of Association of the Company read with Section 260 of the Companies Act, 1956 Mrs. Nirula holds office up to the date of the forthcoming Annual General Meeting of the Company. The Company has received a Notice in writing pursuant to Section 257(1) of the Companies Act, 1956 from a Member signifying his intention to propose Mrs. Nirula for appointment to the office of Director at the ensuing Annual General Meeting.
In accordance with the provisions of the Articles of Association of the Company, Mr. R. Takru, Mr. K. K. Baheti and Mr. S. N. Menon will retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.
The Company is required to get its cost accounts maintained under section 209(1)(d) of the Companies Act, 1956 in respect of plantation products audited in terms of an Order issued by the Ministry of Corporate Affairs (MCA). The cost audit of the Company is conducted by four firms of Cost Accountants appointed with the approval of MCA in the manner provided in the General Circular No.15/2011 dated 11th April 2011 issued by MCA. In terms of the said Circular, full particulars of the Cost Auditors as also other details pertaining to the cost audit are annexed.
Messrs. Price Waterhouse retires as the Auditors at the conclusion of the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.
Management Discussion & Analysis Report and Report on Corporate Governance
As required in terms of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis Report and a Report on Corporate Governance are annexed forming part of this Report.
Directors' Responsibility Statement
Pursuant to Section 217(2AA) of the Companies Act, 1956 (the Act) the Directors state as follows:
1. That in the preparation of the annual accounts for the financial year ended 31st March 2012, the applicable accounting standards had been followed with no material departures;
2. That the Directors had 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 and of the profit or loss of the Company for that period;
3. That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. That the Directors had prepared the annual accounts on a going concern basis.
Conservation of Energy and Technology Absorption
A statement giving details of conservation of energy and technology absorption in accordance with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is annexed.
Particulars of Employees
A statement of particulars of employees as required under section 217(2A) of the Act forms a part of this Report as a separate Annexure. In terms of section 219(1)(b)(iv) of the Act, this Report is being sent to all Members without the said Annexure. Any Member interested in taking inspection or obtaining a copy of the statement may contact the Secretary of the Company at its Registered Office during working hours.
The Company has a large work force employed on tea estates. The welfare and well being of the workers are monitored closely and harmonious relations with its employees are being maintained.
Industrial relations remained cordial throughout the year and your Board of Directors wish to place on record its appreciation for the dedicated services rendered by the executives, staff and workers at all levels and for the smooth functioning of all estates. The policy of transparency and recognition inspired the employees to contribute their best efforts for the Company.
For and on behalf of the Board
K. K. Baheti
Date: 28th May 2012