The 103rd Annual General Meeting of Balmer Lawrie & Co. Ltd., a Public Sector Enterprise under the Ministry of Petroleum & Natural Gas, Government of India was held on 25th September, 2020.

Below is an extract of the Chairman’s Speech:

Unprecedented times require unprecedented measures. This is for the first time in the history of Balmer Lawrie that the AGM is conducted virtually. This is a new experience for the shareholders as well as for the Management. Social distancing is a new norm to be followed and we all have accepted the new normal for a better future. On the positive side, the virtual meeting has widened the horizon of participation of shareholders and given us an opportunity to interact with our shareholders globally.

Overall Financial Performance

Balmer Lawrie recorded net turnover of Rs. 1612 crores during Financial Year 2019-20 as against Rs. 1854 crores in Financial Year 2018-19 registering a decrease of approximately 13% above last year. The Company recorded a Profit Before Tax of Rs. 232 Crores in Financial Year 2019-20 as against Rs. 280 Crores in Financial Year 2018-19. The decrease is being attributable to the decrease in the performance of some SBUs, particularly SBU: Logistics, primarily on account of adverse impact of onset of COVID-19 pandemic during the last quarter of the financial year.

Performance of Strategic Business Units (SBUs)

Balmer Lawrie is a diversified PSU with a presence in both manufacturing and service sectors.

Industrial Packaging (SBU: IP) – The SBU has been showing a consistent growth in volume, turnover and profits. However, during the current year due to overall compressed demand and lower demand from the fruit pulp industry, the volumes were under pressure. Inspite of the adverse market situation, the SBU was able to better the profitability as compared to the previous year. The newly set up Vadodara plant is gradually scaling up its operations and expected to provide a significant edge to the SBU for further growth. Although the outbreak of COVID-19 pandemic and continuing lockdown has casted general uncertainty regarding the resumption of normalcy, it is expected that the unlocking will be gradual, affecting businesses across all segments. The SBU expects recovery of business in the second half of the Financial Year 2020-21.

Greases & Lubricants (SBU: G&L) – The small pack sales have registered growth over Financial Year 2018-19 and there has been an increase in Retail outlets selling the Balmerol brand, which has contributed to better profitability. The Balmerol brand has now been launched in the Nepal market and the SBU intends to sell 300 KL in the Financial Year 2020-21 in this market. The SBU will continue concentrating on increasing network in focused states. Diesel Engine Oil and Motor Cycle Oil will be prime focussed products. During the year under review, the SBU has witnessed a de-growth in its overall performance in terms of production and sales as well as the topline as compared to last year, resulting in a consequent drop in its bottomline. The SBU has worked out strategies in the perspective of product substitution, cost effective formulations, value addition, bio-degradable products, etc. to combat the challenge of margins in the coming Financial Year.

Leather Chemicals (SBU: LC) - This year the SBU entered into the Beam House chemicals segment and has forayed into Finishing chemicals as well. A state-of-the-art Finishing chemicals plant has been commissioned in Chennai during the year. The SBU has introduced new chemicals in the Beam House segment like Wetting agents, Basic Chrome Sulphate (BCS) etc. The SBU also launched a range of finishing chemicals being manufactured in the modern manufacturing facility. In spite of volatile market conditions and closure of tanneries in the Northern Region, the SBU managed to make profits continuously for the fifth year through OPEX initiatives, process improvements, proactive sales and marketing activities.

Logistics (SBU: L) - Under this SBU, there are two verticals viz., Logistics Infrastructure and Logistics Services. Both the verticals continue to drive the bottomline of the Company.

Logistics Infrastructure (LI) – Balmer Lawrie has successfully bagged a contract for providing warehousing and distribution facility for the manufacturing units operating out of Andhra Pradesh MedTech Zone Ltd. (AMTZ) on Build, Operate, Manage and Maintain (BOMM) basis. The warehouse capacity is of 80000 sq. ft. in which cold storage consists of 5000 sq. ft. The same has been commissioned in February 2020 and the operational activities shall be started soon. 

All the three Temperature Controlled Warehouses (TCWs) of the Company i.e. at Hyderabad, Rai (Haryana) and Patalganga (Maharashtra) are operational. The Company is also in the process of setting up a cold storage in the state of Odisha near Bhubaneswar, which is expected to be operational in the last quarter of the Financial Year 2020-21. The Company has ventured into the Cold Chain Transportation business and in the process, has procured 18 number of reefer vehicles. These will be used for providing end-to-end solutions to the customers.

During the year, the CFS business was not able to grow in volume, revenues and earnings as compared to the previous year but was able to retain its present set of customers. Warehousing activity continued to perform well during the year due to better utilisation of space and the business segment of TCWs has also started looking up.

Logistics Services (LS) – Air freight services, though suffered a declining trend in the year under review, continued to be a dominant activity of the SBU with around 56% (last year 68%) share of the overall topline. Other than Air Import and Export activities, ocean freight also has contributed more than 27% of the overall topline for the SBU where the SBU has registered a growth of around 36% (last year). The SBU was able to retain its major GOI and PSU customers and was also able to get some new businesses from those contracted customers. The SBU has a well-defined plan and ambition to continue increasing its private sector business with a view to improve topline as the new sales team gains traction on a pan-India basis.

Travel & Vacations (SBU: T&V) – This SBU has two verticals viz., Ticketing and Vacations.

Ticketing - Despite the SBU facing challenges in terms of changes in airlines strategy to cut distribution cost, denial of segment fee by GDS and stiff competition by online portals and technology firms, it has been able to increase its bottomline by virtue of delivering superior service to its customers. The SBU has grown its profits by over 6% on the basis of continued efforts to control costs such as manpower, interest and other overheads costs. The Company has also established an online B2C brand “FlylikeKing’’.
 
The SBU has been the most severely impacted amongst all businesses under the COVID-19 crisis
as travel has come to a complete standstill effective March 2020. For the industry and the SBU, it may take 2-3 years to reach its pre-COVID-19 levels of passengers flown.

Vacations - Significant growth in Corporate Business was achieved by Vacations to make up for the shortfall in Retail and MICE, which was a result of the challenging business environment / significant industry slowdown in the Financial Year 2019-20. 

Due to COVID-19 pandemic, the tourism and hospitality sector has been hit the most. The pandemic has slammed all the segments and the tourism vertical. The forward bookings for the season of October 2020 - March 2021, which should have started picking up are all muted and the industries are showing discouraging signs. Unless the progression of the virus stops, almost the entire value for the remainder of the 2020 season is at risk.

Refinery and Oil Field Services (SBU: ROFS) – ROFS is engaged in the activity of Mechanized Oil Sludge Processing and Hydrocarbon Recovery from Crude Oil Storage tanks and Lagoons. In the Financial Year 2019-20, the SBU has been able to achieve its targeted turnover and profit. The equipment utilization levels have been able to meet the targeted levels and increased operating efficiency and cost control have enabled us to exceed our targets for the Financial Year.  The market demand is expected to be focused on faster execution timelines and better HSE compliance, with preference for closed loop technologies, requiring minimal manual intervention, thereby negating the hazards related to exposure to hazardous oily sludge