Ludlow Jute & Specialities Ltd Management Discussions

Industry Structure And Developments

The Cabinet Committee on Economic Affairs (CCEA) has extended mandatory packaging of 100% food grains and 20% sugar in diversified jute bags for the Jute Year (July 1,2023 to June 30,2024). This is a positive decision.

The new wage agreement was signed on 3^rd January 2024 for a period of 3 years.

Movement towards jute-based consumer goods aided by increasing environment awareness and lifestyle changes is perceptible.

Opportunities

Disposal concerns related to use of plastic has led to accelerated acceptance of Jute products which are biodegradable as well as ecofriendly. There is opportunity in being able to effectively market Jute as a product which has a negative carbon footprint.

Jute is versatile and has application in lifestyle and promotional bags, decorative, geo-textiles, apparels, composites, upholstery furnishings, and also non-wovens for both technical and non-technical purposes. Research and Developments is continuing to find newer uses for jute. The industry would do well to take advantage of such developments. Also, Government promoting use of jute in Geo Textiles under Pradhan Mantri Gram Sadak Yojana (PMGSY). Usage of eco-friendly jute sacks for packaging food grains under JPM Act 1987 is in sync with the government adopted UN sustainability goals of alleviating poverty, zero hunger, responsible consumption/production and climate change. Hence, continued compulsory jute packaging for food grains is likely to continue to be an environmental necessity.

Threats / Risks and Concerns

Some major areas of risk and concerns:

a) The volatile nature of prices of raw jute on account of demand & supply gap is a serious concern in jute industry.

b) Due to manual nature of work, current generation are prefering other job causing a serious shortage of workers in the entire Industry.

c) Despite modernization of the industry, there is still need of new technology which will automate processes. Unfortunately, there is little or no research in technical advancement.

d) New smaller units are mushrooming. The Government places orders with these new units at the cost of existing mills. Existing units are also expanding capacity to increase their percentage of Government business resulting in a zero-sum game where everyone loses. Eventually we have reached a situation where there is more capacity than demand which remains virtually the same.

Segment-wise or Product-wise Performance

The Company is engaged in single segment product that is, manufacturing and sale of Jute Goods, therefore, Ind AS 108 regarding ‘segment reporting stands complied.

Outlook

The Government procurement for wheat and rice in the crop year 2024-2025 is expected to be lower by 30% over the year 2023-2024. Government order is therefore projected less by at least 25% which has resulted in a continuous decrease in price of finished goods at the time of publishing this report.

Internal Control System and Their Adequacy

The Company has adequate internal control procedures, which provide reasonable assurance with regard to safeguarding the Companys assets, preventing revenue leakages, promoting operational efficiency by cost control and compliance with various statutory provisions. Audit reports are placed before the Audit Committee on a periodical basis, for review. The Committee actively reviews the adequacy and effectiveness of the internal control systems which are well supplemented by surveillance of Internal Auditors. The Companys Internal Financial Controls have been diligently studied and the required systems are in place.

Industrial Relations Front

Your Company maintained good industrial relations during the year under review. In addition to various staff welfare schemes, there was a renewed focus on sanitation and hygiene.

Financial Performance with respect to operational performance

During the year under review, the Companys sales were Rs. 473.25 crores (including exports of Rs. 66.67 crores) against sales of Rs. 543.20 crores (including exports of Rs. 103.56 crores) during the previous year. The production was lower at 45043 M.T. against 47214 M.T.

Key Financial Ratios

There have been significant changes (i.e., change of 25% or more as compared to the immediately previous financial year) in the Debt Service Coverage, Return on Equity, Trade Payable Turnover and Net Capital Turnover ratio during the year under review due to decrease in Government sale price and increase in raw material cost, low-capacity utilization.

Cautionary Statement

Statements made in this section of the report are based on the prevailing position in the jute industry and market conditions. Actual results might differ from what we perceive with respect to Companys outlook and performance.