I sincerely hope each one of you and your family members are safe and well.
CUMI’s 67th year of operations has been a year in which the global COVID-19 pandemic unleashed its full wrath. All economic activities came to a standstill at the beginning of the year owing to the nationwide lock-down imposed in India as well as many parts of the world to contain the spread of the pandemic. Although the second half of the year seemed like a slow return to normalcy, the world is still going through an unprecedented crisis. The resurgence of the pandemic continues to not only cause disruptions to businesses but also been very brutal on humans. With our hope on the vaccine efficacy, our undeterred passion in what we do supported by our compassion and empathy, we at CUMI, our subsidiary and associate companies are geared to get through these unpredictable times.
The global economic recovery is expected to remain below pre-pandemic projections for a considerable period. Reduced personal interaction, uncertainty over the post-pandemic economic landscape and restrained investment are causing an economic slowdown. Due to disruptions in the education system, an unpredictable future of human capital is a heightened cause of concern. In India, the economic growth projections are already witnessing downward revisions. While the severity of the second wave causes further concern, the targeted lock down approach, measured restrictions especially in industrial production backed by resilient consumer behaviour is expected to mitigate the impact to some extent. The announcement of the Production Linked Incentive (PLI) schemes and other infrastructure spends indicated in the Union budget are expected to be good drivers of growth and hold good prospects for the Company.
The slow-down in the user industries at the start of the year 2020-21 further accentuated by the pandemic conditions, impacted CUMI’s first quarter performance. However, our performance picked up pace from the second quarter onwards. The Company delivered a 1% growth in consolidated revenues and 2% growth in standalone revenues despite the challenges and volatility in the market and operating conditions. Improved efficiencies through Total Productive Maintenance (TPM) practices, rigorous and focused cost management efforts in raw material and fixed costs helped the Company increasing its profitability at the consolidated level by 4% and containing it on a standalone basis with a mere 2% decline. Efficient liquidity management backed by a robust collection system and prudent working capital management ensured the Company remained debt-free during such difficult times. Capital expenditure programmes for the year were implemented as per plan, funded entirely from internal accruals.
During the year, the primary focus across all businesses of the Company was to protect the health and ensure safety of its employees. When the lock down conditions were relaxed, the plants swiftly resumed operations adhering to the guidelines mandated by National and regional governments after undergoing necessary safety and maintenance checks. Today, even as we see a dip in the second wave, the safety of every employee remains top priority across CUMI. Even as the pandemic continues, our priority of balancing lives and livelihoods remains unchanged.
During the year, the Company made an interim dividend payment of Rs.1.50/- share of Re. 1 each. The Board has also recommended to the shareholders a final dividend of Rs.1.50/- share of Re.1 each, thus taking the total dividend to Rs.3.00/- share of Re.1 each which is higher than that of the previous year. To meet the minimum public shareholding requirement in its joint venture company, CUMI in its capacity as a promoter, diluted 2.37% of its stake in Wendt India Limited. This has resulted in an enhanced non-operating income for the year.
Abrasives, CUMI’s largest segment engaged in the business of engineering surfaces recorded a marginal decline of 0.2% at consolidated level and a growth of 0.4% on standalone basis. This decline is attributed to pandemic induced downward demand trend and slow growth in user industries mainly automotive, auto ancillary, fabrication and general engineering. The business continued to focus on expansion of its robust distribution network and adopted several digital initiatives which will give it a sustainable competitive advantage in years to come. The focus on new products development for customer requirements continued with more rigour during the year. The indigenous sourcing of input materials mitigated the supply chain constraints in a very difficult year. The capacity utilization in the new coated abrasives facility set up in Sriperumbudur improved progressively during the year.
Revenue growth in Volzhsky Abrasive Works, (VAW) and CUMI America, our Russian and American subsidiaries was impacted by their domestic markets – slowing auto/ auto component markets as well as owing to the lock down conditions. Wendt (India) Limited, joint venture company manufacturing super abrasives, grinding machines, precision components though initially impacted by the lock down ended the year reasonably well by maintaining its revenue levels backed by a very strong growth in the last quarter despite the fall in its export revenues.
Sterling Abrasives, the subsidiary manufacturing specialist conventional Abrasives, benefitted from higher agricultural acreage, thus achieving growth and profitably.
CUMI Abrasives and Ceramics Company, China despite the challenging business conditions registered growth in its revenues.
The Ceramics business which comprises both the Industrial Ceramics and Refractories recorded a marginal decline at both standalone and consolidated levels largely due to the pandemic. With prudent cost management, favorable product mix and maintaining efficiencies, the business recorded profits. Largely export driven, the Industrial Ceramics business was able to to serve its customers despite the nationwide lockdown imposed at the beginning of the year. The business focus was on enhanced marketing efforts to tap newer markets, strengthening its positioning across geographies, as well as forging alliances with global customers for long term sustainable solutions.
The business has positioned itself as a global player with smart manufacturing initiatives and completed the addition of a Continuous Metallization furnace towards capacity addition. In collaboration with Gas Authority India Limited (GAIL), the business recently executed a project to bring Piped Natural Gas (PNG) to its facility in Hosur. The transition from liquid fuel to natural gas is expected to reduce emissions significantly in line with CUMI’s sustainability goals.
The trade tensions between China and Australia hampered the business of CUMI Australia, the subsidiary engaged in lined equipment business for wear resistance. CUMI Australia was impacted by logistics issues relating to container availability and port congestions. This coupled with the COVID-19 challenges resulted in a fall in revenues and consequently, the profitability as well. The Industrial Ceramics business arm of CUMI America did well despite the prevailing conditions there.
Lower demand and rescheduling of project execution by the customers on account of the pandemic conditions impacted the Refractories and Composites part of the business. Yet, the business did well to maintain its volumes and profitability. During the year, the business obtained the “TPM Excellence Award” from JIPM, Japan. This TPM focus will enhance its operational efficiencies and quality consistency, which is expected to yield results in the coming years.
The pandemic related challenges and the consequential demand slow down adversely affected the revenues of Murugappa Morgan Thermal Ceramics, CUMI’s joint venture engaged in the manufacture of Refractory Ceramic Fibre products. The business achieved good growth in profits by maintaining tight control over costs to ensure better efficiencies.
Riding on the shortages of supplies from China, global trade tensions and increasing minerals demand since second quarter of the year, the Electrominerals business was able to recover quickly from the difficulties of the lock down. Despite the volatility in prices of raw materials and supply chain challenges, the business registered a good growth in revenues both at standalone and consolidated levels at 7% and 4% respectively. The austere measures undertaken to control fixed costs, improve efficiencies, and optimum sourcing of raw materials aided the business to record a significant growth in profits of over 46% at a standalone level and 30% at a consolidated level. This was ably supported by the growth at VAW, Russia with optimum capacity utilisation, favourable product mix as well as commercial launches of new products for niche segments.
The power generation from the Maniyar Hydel plant continued to meet the power requirements of the business thus aiding its operational efficiency. Though the South African subsidiary registered growth in sales as compared to the previous year, the continuing raw material scarcity, high fixed costs, and soft realisations continue to impact its profits adversely. While the losses have minimised compared to the previous year, profitability remains an issue and exit options are continuing to be pursued.
Southern Energy Development Corporation Limited, the gasbased power generation subsidiary continues to support the power requirements of the plants in Tamilnadu, India. Generation was marginally affected owing to the pandemic lock down in quarter one. This coupled with the reduction in gas price impacted its profitability for the year. During the year, the subsidiary company diversified its product offerings to solar energybased solutions in addition to the gasbased supply in line with the overall sustainability goals of the Company.
Net Access, the subsidiary providing IT facilities management and allied services recorded a decline in revenues and profitability owing to the challenging conditions. The subsidiary’s role in ensuring a seamless adaptation to remote working of all line functions across the organisation ensuring the safety of the employees who could continue to work from home throughout the year, was significant and commendable. It also provided a strong IT platform migrating to the new normal conditions, thus helping to manage the demands of going virtual.
Research and Development
As a Material Science Company, we believe that only a continuous pursuit of innovation and sustainable processes aligned to a more responsible use of Nature’s resources will provide enduring growth. Accordingly, research and development activities were carried out with rigour at the various Centres of Excellence set up across locations and recognised by the Department of Scientific and Industrial Research, Government of India. Further, CUMind – the customised innovation framework based on design thinking methodology has been imbibed into the functioning of the business units thus providing CUMI with a competitive advantage.
People continue to be our top priority across all geographies. Once the nationwide lock down was imposed in March last year, with the help of technology, the Company transitioned to remote working seamlessly which continued throughout the year considering the safety of the employees. Even when the plants resumed operations as per the guidelines, all safety and health protocols were ensured while running operations. Employees who needed critical care or had co-morbidities were advised to continue remote working in a safe and secure manner thus reducing the burden on the infrastructure. The lock down days were utilised for people development activities in terms of re-skilling and up-skilling. Employees were actively encouraged to pursue learning and build their functional capabilities. While entities across geographies followed their respective protocols in running operations, wherever possible standardisation of policies and protocols were ensured.
I am overwhelmed and most grateful to teams across CUMI, its subsidiaries and joint ventures who continue to show exemplary resilience in not only handling a crisis as severe as this with conviction and commitment but who have strived hard to deliver performance in such difficult times, thus creating value for the stakeholders. Throughout the year awareness campaigns on health, mental well being and hygiene, timely policy decisions and reviews, swift adaptation to the new normal, continuous engagement with customers, supply chain partners etc., supported an effective crisis management.
While we managed to navigate through the first wave of the pandemic without any major impact on the health of our employees, the severity of the second wave which resurged in the latter part of the year has shown some disturbing impact. We express our heartfelt condolences to all those who have lost their loved ones during this pandemic. The CUMI team is fully committed to assure necessary support and welfare measures have already been rolled out.
The Annual Report for the year and the Notice convening the 67th Annual General Meeting (AGM) have been sent electronically to all shareholders whose e-mail IDs are registered with the Company. If you are yet to register, I urge you to do so to receive the Report. Copies of the above have also been uploaded on the website of the Company www.cumimurugappa.com. Considering the health and safety of our shareholders and social distancing being the need of the hour, the 67th AGM of the Company is being convened through audio-visual means. The the manner of participation is detailed in the AGM notice. Please contact the Company Secretary for any clarification or support to facilitate your participation in the meeting.
During the year, in addition to the routine CSR initiatives such as the CUMI Centres for Skill development (CCSD), the grants made by the Company were used in education, healthcare, as well as rural development. Besides monetary contributions to PM-CARES Fund, the Company actively helped communities in and around areas of its operations to combat the pandemic. During the lock down, the canteens of the various plants in the Company served as community kitchens serving the needy.
CUMI continued to be a proud recipient of several prestigious recognitions. Despite the pandemic, the Company underwent a rigorous assessment of its HR practices and was recognised by Confederation of Indian Industry for its Significant Commitment to HR Excellence, thus reinforcing our commitment to constantly excel in all that we do.
Mr. N Ananthaseshan, our Managing Director has not only led the organisation under the most volatile and unprecedented conditions but has also managed to deliver a strong performance in what I reckon as a very challenging year. He along with his leadership team across various countries demonstrated a strong resilience in positioning the Company strongly as it is today despite the uncertain and disruptive environment. My appreciation to the leaders across the Company and to teams of people across all the Company’s locations. Mr. P S Jayan who headed the Electrominerals Business in India retired after serving the company for over 35 years. We thank him for his contribution to CUMI and wish him well in his retirement. He is succeeded by Mr. M V Sivakumaran who has been with CUMI for about 25 years working across the Abrasives and Ceramics businesses. Further, Mr. Bhaskharan Kannun and Mr. P Padmanabhan took over as the Head of Human Resources and Chief Financial Officer of the Company respectively. We wish them well.
The Board continues to be a great source of inspiration to the Company, the leadership team and to me personally. They have been very generous with their time and their active involvement and expertise has helped the Company tide over a very challenging phase last year. With their continuous support and guidance, the Company is poised to take up further challenges with cautious optimism. I thank them profusely for their wise counsel.
I am pleased to welcome Mr. Sridharan Rangarajan to the Board as Director – Strategy & Finance. Sridhar is well known to all of you as he was earlier the CFO of the Company. CUMI will be immensely benefitted by his experience and expertise.
I take this opportunity to thank all stakeholders, customers, suppliers, vendors, bankers, business partners, authorities and of course you, shareholders for your continuing support and encouragement to us. This is a time of change and great uncertainty. Your unstinted support during adversities such as these goes a long way in propelling us to venture into new areas as also challenging the status quo. This support gives us the courage and conviction to remain resilient with true grit in taking on challenges and converting them into opportunities to make materials matter sustainably for our planet. I assure you that we will remain committed to delivering value as we have been doing over the past several decades.