Atul Ltd 2016-17

Atul Ltd | Annual Report 2016-17 Letter to the Shareholders Dear Shareholders, 2017 will mark the completion of 70 years of Atul. Though our inspiring Founder, Mr Kasturbhai Lalbhai, is not in our midst, the Values he cherished and which have in fact equipped our Company to withstand the test of time – Integrity, Excellence, Humility, Hard work and Larger purpose – continue to guide us as we endeavour strengthening our people, processes and products, keeping in focus what our Company can and ought to be in the years to come. The world economy at US$75 tn grew by 3.1% – similar to that in 2016; the USA (US$18.6 tn, 1.6%), China (US$11.2 tn, 6.7%) and Japan (US$4.9 tn, 1%) remained at the top. India (US$2.3 tn, 6.8%) is fast moving forward, but has a long way to go economically and also environmentally – the dimensions of the work to be done are vast, giving us an opportunity to grow meaningfully – locally as well as globally – and thereby contribute in our own small ways to nation building. The Chemical industry at US$4.4 tn contributes 6% to the world economy; it grew by 1.5% – not very differently than it did in 2016. India (US$110 bn, 7%) remains much behind the top 3 – China (US$1.6 tn, 5%), the USA (US$630 bn, 2%) and Germany (US$190 bn, 1%). This calls for industry participants and the Government to work together as the Chemical industry was, is and will remain an integral part of the economy. Our Company, driven by science and technology, will continue touching lives in a responsible way. Our Company achieved volume growth of 16%, but price and margin de-growth pulled down the performance ; for the year, i) sales at ` 2,639 cr increased by 10%, ii) EBITDA at ` 512 cr increased by 6% though EBITDA at 19.4% decreased by 0.78 percentage point and iii) PBT at ` 400 cr remained unchanged; however PAT at ` 285 cr was higher by 4% on account of lower tax liability. Our Company decreased its borrowing from ` 302 cr to ` 155 cr. Barring Atul Brazil, the operating subsidiary and associate companies improved their performance; Atul Bioscience and Rudolf Atul Chemicals declared dividend of 60% and 127.50% respectively. AkzoNobel and our Company have formed a 50-50 joint venture partnership, named ANAVEN, to manufacture Monochloroacetic acid – the plant will not only be the biggest in India, but also the best in the world in terms of efficiency. The proposal to merge Amal with our Company has been dropped. We are not happy with our performance in 2016-17 as our potential is much higher – we continued to perform poorly in Colors; our performance deteriorated in Crop Protection – Retail significantly and Polymers – Retail marginally. We believe the investments we have made and the path we are pursuing will deliver value, but I was perhaps too optimistic in my last letter wherein I had mentioned that we will try and achieve sales of ` 4,000 cr in 2017-18 – this will take some more time. Over the last 3 years, we have made investments in projects (related to sales growth) totaling to ` 350 cr. We are taking time to achieve the expected rise in sales as some of the projects although completed are under stabilisation; it is also because of the time being taken to build more capabilities (in particular) for growing retail sales. During 2016-17, we completed 3 expansion projects with an investment of ` 117 cr. In light of these facts, I believe higher sales will be realised in course of time. Atul Foundation took up initiatives mainly in Gujarat and also in Jharkhand, Rajasthan and Uttar Pradesh. Atul Bioscience and Rudolf Atul Chemicals contributed to Atul Foundation. The initiatives which covered programs such as Education, Empowerment and Infrastructure were in step with national priorities. DPD, a subsidiary company in the UK, was recognised by the Community Council of Somerset for supporting a play park. Our people are also supporting the initiatives of Atul Foundation. How well our Company will do in the times to come will depend on the competence, perseverance and teamwork of our people for it is they who institutionalise efficient processes and introduce new products I services. Our sustainability will depend also on how well we develop our people, old and new. We are therefore consistently focusing on enhancing 3 areas – performance management, people development and recruitment.