Some costs are of course really joint costs and not attributable to any
division, but even the costs that are relatable to each line like material costs
are not separately disclosed in the annual report. In some cases, we can, of
course, make informed guesses; for example, limestone and pozzalana could
have been used only for the cement business.There is some information about unit volumes and capacity utilization that
we can extract from the report. Comparing 1991 and 1990 kin terms of
volume and value of sales, we found the following for the three lines of
business:Line of Business Growth in
VolumeSales Value Change in
Unit Price.Export Business 6% 32% 25%
Industrial Synthetics - 1% 2% 3%
Cement 2% 25% 23%We can see that:
- The export business shows a good rise both in unit volume and in value. The
rise in unit prices is well in excess of the rate of depreciation in the value of
the rupee, so that higher prices have been realized even in dollar terms. - Cement output has risen only marginally, and the growth in value is almost
entirely accounted for by price increases. The price increase is clearly much
above the general rate of inflation during the period. - Industrial synthetic output has declined marginally, and price has risen
slightly to produce a marginal rise in sale value. The unit price has failed to
keep pace with the general rate of inflation and it is very likely that the
margins in this business are under pressure.
Further details on some of these can be found from the Directors’ report and
the Chairman’s speech at the Annual General Meeting of the company.
These statements contain the management’s evaluation of the past year’s
results and its assessment of the prospects for the next year. Since these
statements are the only place where the company’s future is discussed, they
are of great value to the investor. However, in deciding what reliance to
place on these statements and how to interpret them, we must have regard for
the past track record of the management. Some Chairmen tend to be unduly