CUMI, its subsidiaries, associates and joint ventures in India and in countries such as Russia, South Africa, Australia and China had a very difficult year 2013-14.The challenges posed by the low economic growth in developed countries and slowdown in emerging markets continued through the year. High inflation, fluctuating currencies and a subdued overall business confidence impacted the first half of the year. Although the second half showed marginal improvement in economic indicators, many industries that CUMI serves in India and across the world such as Automotive, Infrastructure, Utilities and Mining showed a declining trend.
In this uncertain scenario, CUMI’s consolidated revenues grew by 8% over the previous year. The main focus was to retain business share with all customers and enhance it wherever possible by an increased engagement through new products, applications and service support. New projects, a very important source of revenue declined sharply causing a conscious shift towards repairs and maintenance opportunities. This brought about a positive impact on overall customer engagement. Cost pressures continued across all businesses, in all geographic regions, owing to higher input materials and utilities costs. Pricing challenges were met to an extent by a strong focus on value delivery and ensuring a consistent cash cycle. These efforts cost management, consolidation and a relentless pursuit of customer engagement led to a marginal improvement in the consolidated profit before tax.
The dividend has been maintained at Rupees 1.25 per share based on our confidence in our longer term strategy of customer focus, operational excellence and financial prudence. Margins in the abrasives business, in India, declined owing to a revenue drop in bonded abrasives. However, a better performance in coated, non woven and super abrasive products helped to off-set the downtrend in the margins to an extent. Product mix in India was unfavourably skewed towards the economy range of products. A comprehensive dealer motivation programme based on full service support has helped to improve performance and this will continue in the future as well. A new facility for making Sanding discs will come on stream in the first half of financial year 2014-15.This will further increase the range of product offering in coated abrasives. Super abrasive product sales were good because of timely product introductions and effective channel management. In Russia, the abrasives business remained stable. China and America are showing good growth in the wake of management changes but profitability was impacted by higher costs. Sterling Abrasives, a subsidiary that manufactures customized bonded abrasives and Wendt India, an associate company which does so similarly in super abrasives, maintained performance levels as in the previous year in difficult market conditions.
The ceramics business declined owing to lower sales of wear resistance products in India and reduced off-take from Australia on lack of customer demand. Refractories in India and South Africa, as also anti corrosives in India were severely impacted by postponements in project orders in the Iron and Steel and Chemical Processing Industries. The joint venture plant to manufacture ultralight ceramics has been commissioned and the products are undergoing customer evaluation. Murugappa Morgan Thermal Ceramics, an associate company had a very good year. Although the slowdown in projects affected sales of refractory ceramic fibres, value added products gained good acceptance in India and across the world.
The electrominerals business in Russia and India had a good year. Changes in silicon carbide product mix in Russia had to be effected to respond quickly to market conditions. Thukela Refractories Isithebe, South Africa and Foskor Zirconia had increase in production and sales volumes with greatly acknowledged good standards of quality. First shipment of Zirconia bubbles was made to customers and gained good acceptance in India. The increasing trend towards higher performance minerals and a wider customer footprint across the world, contributed to an overall growth of 21% in electrominerals for the Company.
Research and Development, Product Design, Application Engineering and business partnerships with customers, academic and research institutions and companies that enhance scope of offerings jointly, provide an unique character to CUMI’s business strategy. Accordingly, investments are directed towards these initiatives, thus enhancing the overall capability to serve customers in existing and new markets. During the year, there was a planned creation and use of additional intellectual property to create new business opportunities or improve existing operating processes. A dedicated team of technologists and application specialists work across the company seamlessly sharing ideas and thoughts to serve customers better.
Continuous training and development of people is very vital for any organization. During the year, the company set up adedicated Skill Development centre in Hosur to address the skill gaps identified across its manufacturing locations though a structured training and development programme based on the National Council Vocational Training syllabus. Besides focusing on technical aspects, the programme provides qualitative training on behavioral skills, in addition to enhancement of language speaking abilities. The company plans to set up similar centres across locations to ensure availability of trained technicians. Further, this initiative aids the company in its contribution to the society by training youngsters and creating job opportunities .
The quest for technological excellence needs to be well supported by strong all round leadership. CUMI’s management team is very ably led by Managing Director Mr.K Srinivasan and his colleagues across business divisions and geographies. It is a matter of great pride that Mr.V Ramesh who headed the abrasives division has moved to lead another Murugappa Group company as its Managing Director. This is yet another example of leadership development within the company and Mr.Ramesh has been succeeded by Mr.Ananthaseshan who headed electrominerals. During the year 2014-15, Mr.Deepak Durairaj, a member of the management committee will retire, after having served the Company for over 35 years. We wish him well in his retirement.
Our board of directors has always been very supportive of the Company, its strategic direction and continuously challenges the team to greater levels of achievement and encourages the management team to keep a balance between aggression and caution. We welcome Mr.Aroon Raman to the Board. Mr.Raman has a wide and very successful experience as an entrepreneur in the area of Fibre Sciences having created and managed companies in the forefront of materials science and technology. Personally, I am grateful to all my colleagues on the Board for their support and counsel to me. To our customers, bankers, suppliers, well wishers and to all of you our cherished shareholders, my sincere thanks and grateful appreciation for your unstinted support.
Over the six decades of its existence, the core strength of CUMI has been its people. Apart from strengthening customer relationships, the team is focused on core values of integrity, quality, passion, respect and responsibility towards all stakeholders and the communities that the company operates in and serves. In a difficult year, the team has also exercised great financial prudence by reducing debt further making it well poised to invest and grow as and when opportunities arise.
The CUMI team comprising of people from several nationalities, though may be divided by geographical boundaries, are all committed to enhancing overall stakeholder value and stand united in their quest of not just making scarce materials go further but to a common vision of Making Materials Work For Man....