MARKETING  

FMCG Growth remained buoyant , it was across segments. As the Indian economy grows, the Indian consumer’s share of wallet is shifting towards health, education and transportation. This means increased competition within FMCG for smaller and smaller proportion of consumer’s expenditure. The opportunity however, lies in the consumer’s willingness to trade up and also replace existing categories with newer premium categories. Increasing modern stores in urban areas also present an incredible opportunity. Even though nationally Modern Trade contributes only 3% to the total retail trade, the number is higher for select cities. Some premium categories like liquid toilet soaps and hair conditioners derive more than 25% of sales from the modern trade stores.

LAUNDRY & HOME CARE 

The laundry and home care market in India grew during the year.  Home care segment and Laundry Care segment registered  growth of 25% and 22% respectively. While the glass cleaners segment recorded the  growth of 33%, toilet cleaners segment recorded a  growth of 17%.  The highly penetrated category of washing powders grew at 18% by value despite the de-growth of 3% in volume. The growth is due to the price increase and consumers upgrading to quality segments across categories.

Henko – The volume of Henko Stain Champion Powder  maintained, while the volume  of Henko Bar grew by 10%.  The Value growth for both Henko Powder and Henko Bar were  at 8% and 20% respectively. High media investments have strengthened the brand equity further as Henko Stain Champion Powder gained household coverage by 8%. Henko Bar had reached 1.23 million  households and registering  growth of 32%. Judicious price increases and right mixing of selling units have helped the brand to reduce the effect of cost increase. Competition too has been very aggressive in media and consumer promotion activities. 

Mr. White – Mr. White was re-launched during the year with enhanced formulation, long lasting whiteness proposition and upgraded packaging to reflect the new identity. The profitability of the brand has improved despite severe input cost increase and reached market share of 4.2% by end 2008. With improved brand health parameters and profitability the brand is now poised to grow in 2009 with consistent support in media in select strong markets.

Pril – After facing stiff competition in 2008, Pril Liquid is being relaunched as Pril Perfect with the Triple action formula and new communication. The task for Pril Liquid is to continue to hold leadership position, the next level of growth is expected through upgrading consumers from Bar to Liquid. Plans are also in place for margin improvement of the product. Pril Anti bacterial Neem has been honoured with the “Product of the year award” for its innovation in utensil cleaner segment on the basis of the Survey conducted amongst the Consumers.  Pril also won the status of “Superbrands” having chosen as one of the top 20% of all brands across all segments and all categories in the Country.  It is the only brand in the Liquid Dishwash category to have won this status.

Bref - Bref, the ultra strong hygienic cleaner brand from the international Henkel stable was launched during the year in South and Modern trade channel with three product line-up – Power cleaner, toilet cleaner and cistern block. The launch was backed by media support and marketing activities like Door to door sales, merchandising activities in Modern Trade, direct demonstration and sales in consumer households through the Bref Clean squad etc. Bref attained a 13% share in power cleaner category and a 3% share in the Toilet cleaner category in South.

COSMETICS & TOILETRIES  

Henkel cosmetics and toiletries business grew by 7%. The toilet soap category witnessed a growth of 16.2% in value and 1.9% in volume. The increase in the Input material cost also reflected in price increases in almost all brands of soap. This also reflects in the category value growth being much higher than the volume growth. Media investment on Margo Original Neem (MON) during the year was increased substantially and the advertising message had a strong portrayal presence of “Pure Neem Oil” in Margo. The communication featured popular Hindi movie actor Ms. Rani Mukherjee. The new communication and activation of Rs.5 SKU of Margo helped the brand in gaining inroads into Northern and Western markets besides strengthening the brand in the traditionally strong markets of West Bengal and Tamil Nadu. Margo Toilet Soap grew by 26.2%. Fa deodorant grew by 4% , it has been a good year for Fa soap which witnessed an unprecedented 125% growth. Neem Active toothpaste also registered stable volumes and Value.

HAIR CARE DIVISION –  SCHWARZKOPF PROFESSIONALS  

Professional Hair-Care Division went through a successful restructuring during the year. SKP launched BC Men and Hilo in 2008. Mumbai academy was opened with the launch of EL Spring Summer collection. It continued its effort to bring world class trends to the Indian Salons and trained several Hair stylists through seminars and training abroad.

PRODUCTION

Karaikal - The plant was operated to meet the market requirements of our branded products viz., Henko Stain Champion, Henkomatic, Mr.White, Chek, Bref and Pril range of products, zeolite and export requirements. The Zeolite plant was operated to cater the captive, domestic and export market requirements. The Performance level of both the plants has been satisfactory.  Tiljala -  Performance of the Margo plant and Neem Tooth Paste Plant has been satisfactory with on stream efficiency of 95% and 96% respectively.  The plant has operated to cater for both the requirement of domestic and export markets.

SALES

2008 has been a year of good growth. Total branded business grew 16%, driven by both the Laundry as well as the Cosmetics.  This growth was the highest ever in the last seven years.  The highlight of this growth was the performance in the fourth quarter, when the overall business grew by as much as 34 % over the last quarter of 2007.

Laundry and Homecare category registered growth of 17% primarily on the back of Detergent brands such as Henko and Pril Bar. In the same period, the Cosmetics business grew by 12%, driven majorly by Margo Toilet Soap. Among the various channels, CSD and Modern Trade consolidated further, giving the company over 40% growth in this channel.  The Company made a successful entry into Household cleaning category via the Brand Bref, which continued to strengthen on Distribution and Market Shares, showing a positive response to investments. 

HUMAN RESOURCES

Your Company is built on people – creative, competent and committed, who continuously advance the innovative brands and superior technologies with their inventive talent and pioneering spirit, ensuring that the discerning Indian consumers can trust them.  Your Company’s corporate culture and the Vision and Values help unite the workforce and provide standards for how your Company conduct the business.  By building high levels of commitment, establishing challenging performance standards and creating a passion for excellence, the sustainable success of your Company is brought about through its people.

AWARDS

The Company was awarded ''Energy Conservation Award'' for the year 2008 by the State Government of Pondicherry. Your Company was awarded ''Suraksha Puraskar'' - Bronze Trophy for the block 2004 -2006 in 2008 indicating excellent safety conditions in the factory in comparison to industry norms by National Safety Council - All India Chapter.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to the Conservation of Energy, Technology Observation, Foreign Exchange Earnings, outgo as required u/s 217 (1)(e) of the Companies Act, 1956 are enclosed as part of this Report.

SUBSIDIARY COMPANY 

The Audited statements of accounts of the subsidiary company viz., Henkel Marketing India Ltd for the year ended 31/12/2008 together with the reports of Directors and the Auditors, are annexed as required u/s. 212 of the Companies Act, 1956   During the year under review the subsidiary company achieved a turnover of Rs.467 Crs as against the Rs.418 Crs for the previous year. 

DIVIDEND

Your Directors have not recommended dividend considering  the fund requirements for future business expansion. 

PUBLIC DEPOSITS

Your Company has not accepted any deposit from the public during the year.

DIRECTORS 

The Board wishes to express its utmost grief on the sad demise of Mr.Rajendra S Lodha, the Director of the Company during October 2008. The Directors places on record the contributions, guidance and support provided by Mr.Lodha to the Company as the Independent Director on the Board and also as a Member of the Remuneration Committee. 

Mr.A.Satish Kumar resigned as Managing Director of the Company.  Board of Directors places on record its appreciation for the wise counsel, valuable support and esteemed contributions provided by him to the Company during his tenure as Managing Director of the Company. Mr.A.Satish Kumar has consented  to serve as the Member of the Board of Directors.

The Board had in accordance with Articles of Association appointed Mr.Jayant K Singh as Managing Director effective from 1st April 2009, is being placed before the Shareholders for their approval.

Mr.Peter K Scherer was appointed as Nominee Director of Henkel AG & Co. KGaA, Germany in the place of Mr. Ian John Parish. The Board places on record its appreciation for the valuable support and guidance rendered by Mr. Ian John Parish during his tenure.

Dr.A.C.Muthiah, Mr.Thomas Jungmann & Dr.Besant C Raj who retire by rotation at the ensuing Annual General meeting, being eligible, offer themselves for reappointment.  Brief Profile, nature of expertise and directorship details are furnished to the members in the note accompanying the Notice convening the Annual General Meeting.
In accordance with Clause-49 of the Listing Agreement, particulars relating to the Directors seeking re-election / appointment at the ensuing Annual General Meeting are furnished in the annexure to the Notice.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors’ Responsibility Statement, it is hereby confirmed :

i) that in the preparation of the annual accounts for the year ended 31st December 2008 the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the year and of the profit or loss of the Company for the year under review;

iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors had prepared the accounts for year ended 31st December 2008 on a `going concern’ basis.

CORPORATE GOVERNANCE

Your Company had always endeavored to adhere to high standards of Corporate Governance and ensured its compliance in both spirit and law. As per the requirements of the Listing Agreement entered into with Stock Exchanges, a report on Corporate Governance together with the certificate from M/s N.Sridharan & Associates, Practicing Company Secretaries, confirming the compliance of the Corporate Governance is attached to this report for information of the Members.

DISCLOSURES

• A “Management Discussion and Analysis Report” highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. has been furnished separately and the same forms part of this Report.
• As required by Section 217 (2AA) of the Companies (Amendment) Act, 2000, Directors’ Responsibility statement is annexed hereto and forms part of this report.
  

PARTICULARS OF EMPLOYEES

A statement giving information and particulars of the employees as required u/s  217 (2A) of the Companies Act, 1956 is enclosed as part of this report. However the Report and the Accounts is being sent to all the shareholders excluding the aforesaid information.  Any shareholder interested in obtain¬ing the statement may write to the Company Secretary at the Registered Office of the Company.

AUDITORS

M/s CNGSN & Associates, Chartered Accountants, Chennai, the Statutory Auditors of the Company, retire at the conclusion of this Annual General Meeting and are eligible for re-appointment as Auditors of the Company for the financial year 2009.  Regarding the observations made by the Auditors in their report, the notes forming part of Accounts are self-explanatory.

ENVIRONMENT AND SAFETY MEASURES

Karaikal - In line with the global trend and Henkel’s policy, the thrust for safety, health and environmental issues (SHE) was sustained, with recognition from various Governmental and non governmental organizations, and appreciation from local populace. ISO 9001 Quality Management System is in place since 1994. The ISO 14001, Environment Management System and OHSAS 18001, Occupational Health & Safety Management System are successfully implemented. The three management systems (Qualiity, Environment and Occupational Health) were integrated and the Integrated Management System is now in practice. Various Environmental programs and Risk reduction programs were taken up. Tiljala – ISO 9001:2000 (QMS) and ISO 14001:2004 (EMS) are in place and practice. It is planned to implement OHSAS ISO 18001 by 2009 and also to implement GMP in Neem Toothpaste section in accordance with ISO 22716.

FUTURE PROSPECTS

Your Company is planning aggressive growth strategies for domestic sales and are confident that emphasis and consistent efforts on Quality and Service will help your Company to   achieve the  desired goals.  We aim to improve the quality of our products on a continuous basis while achieving  sustained  profit growth. 

COST AUDIT

As per the requirement of the Central Government and pursuant to Section 233 B of the Companies Act, 1956 the Company carries out an audit of cost accounts relating to our products every year. Subject to the approval of the Central Government, the Company has appointed Mr.A.Madhavan, Cost Accountants, as the Cost Auditors of the compa¬ny for the year 2009.

ACKNOWLEDGEMENT

Your Directors wish to acknowledge the valuable guidance and assistance being received from your Company's collaborators, M/s Henkel AG & Co. KGaA and Tamilnadu Petroproducts Ltd. Your Directors take this opportunity to express their gratitude to all the employees for the significant personal efforts and their collective contribution to enable the company to achieve good performance and maintain steady progress. Your Directors wish to thank the shareholders for their continued support, encouragement and the confidence reposed in the Management.

For and on behalf of the Board of Directors

Date: 31st  March 2009        
Place: Chennai      

Dr A.C.MUTHIAH
Chairman

ANNEXURE TO THE DIRECTORS’ REPORT

Disclosure of particulars with respect to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo as required under Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Report of the Board of Directors for the year ended 31st Decem¬ber 2008.

Conservation of Energy:

1. Karaikal Plant

a. i. Energy conservation measures taken:

As part of ISO 14001, Environmental Program; the energy saving potentials are being continuously explored. The following activities were carried out in 2008.

ii. Additional investments and proposals for 2009 being implemented for reduction of consumption of energy.

VFD’s for the Equipments – 41P05, 35K03,33P10B & 43H26 
Investment - Rs 4,20,000/-
Savings - Rs 6,60,000/- 

iii. Impact of the measures at (i) and (ii) above for reduction of energy consumption and consequent impact on the cost of production of goods.

Savings Rs. 41.97 lacs.

2. Tiljala Plant

a. Energy conservation measures taken:

i. Change over to Light Diesel Oil from Furnace oil to minimize the SPM level in Boiler..

ii. As per ISO 14001 guidelines, Environmental management programs (EMP’s and OCP’s) are formulated to conserve natural resources and reducing consumption and wastage.

iii. Checking the feasibility of running Bio diesel in boiler. Trial run is in progress.

iv. Initiatives taken for reusing the Reverse osmosis plant permeate water for using in toilets and road washing.

v. Automatic power factor correction panel installed for maintaining the power factor above 0.9, thereby getting a rebate from the government.

b. Additional investments and proposals, if any, being implemented for reduction of consumption of energy.

None

c. Impact of the measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods.

Approx savings is Rs 4.0 lacs per annum.

DISCLOSURE PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

A. RESEARCH AND DEVELOPMENT (R & D)

a) Specific areas in which R&D carried out by the Company.

Continuous formulation up-gradation of brands carried out as per market requirements.

New products - Bref Toilet Cleaner, Bref Power Cleaner, Bref Cistern Block, Pril Multi Degreaser, Pril Dish Washing Liquid with antibacterial Neem , Pril Dish Washing Liquid Lemon , Fa Deodorant Glamour Touch Golden Star & Fa Deodorant Glamour Touch Purple Passion.
 

B. BENEFITS DERIVED AS A RESULT OF THE ABOVE R&D.

• Product superiority maintained across all the brands.

C. FUTURE PLAN OF ACTION.

• Cost optimization of existing brands and products
• Development of new products as required by marketing.
  

D. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

The Company continues to benefit from the R&D efforts of Henkel AG & Co. KGaA, Germany. The products and processes are customized to local conditions to offer “value for money’ products to the consumers.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign Exchange used         Rs.  5219 lacs 
Foreign Exchange earned     Rs.  1098 lacs