High Lights of the call are:
- Core business (Textile) profitability has improved in the current quarter period. Focus on cost improvement initiatives has also yielded significant gains during the quarter. Net sales witnessed a growth of 3% largely due to improvement in realizations by 11% reflecting the brand strength of the company.
- The company has regulated dispatches to trade in the domestic market. This drives the company to have excess inventory and help to control the capacity utilization.
- Sales in Branded Apparel grew to Rs 146 crore, up by 1% despite the challenging business.
- Despite the challenging market conditions, accessories business improved by 20% in the quarter under review. The company is focusing on the improvement in performance of EBO’s and accessories business.
- The company has added Park’s as third Rs 100 crore brand in the quarter, along with Park Avenue and Color Plus. The sales in Park Avenue grew by 10% making brand worth of Rs 250 crore and Parx has improved by 15-16% and became Rs 105 crore worth brand. Although Color Plus was generating around Rs 165 crore of revenues, didn’t fare well as the company has some supply chain problems, in not able to take up the brand in the right season.
- The company has recently launched format Neckties and More has been well received.
- At the retail front the company is renegotiation of rentals by 20-25% and reviewing on non profitable stores. 24 new stores were opened during the quarter adding over 55000 sq ft of retail space. In the Middle East and SAARC countries, the company is expanding its stores to 36 from 30 stores, as the revenues in these regions can hold up despite of the current decline.
- The company has experienced like to like sales growth of 3% in the quarter on y-o-y basis. And the LTL growth for nine months ended December 08 was 11.5%.
- The garmenting sales have improved by 7% on y-o-y basis. The off takes from the company were slow but the Japanese business has fared well.
- The first phase of Suit plant project has commenced commercial production and has achieved quality stabilization.
- The company has scaled back in the expansions in Metro cities and is keen on focusing in Tier4 and Tier 5 cities with Third party partner ship and Franchise openings.
- Woolen fabric business has witnessed growth in both volumes and realizations. The business has turned profitable since conversion of subsidiary.
- Cotton shirting fabric business has witnessed improvement in domestic and export realizations by 11% and 9% respectively.
- The company has closed loss making US and Belgium plants of denim in the month of December. The JV is in process of completing the assessments of the value of its investments in these overseas subsidiaries and on completion, will make provision for diminution.
- Indian Denim operations maintain high capacity utilization and are EBITA positive. The realization for Indian operations has increased by 19%. Going further, the company feels that it should maintain 9% EBITA margins in the denim business.
- As the domestic cotton prices were ruling high compared to the international prices, the company expects cotton prices will soften further. So the company has not covered its cotton requirements hoping to get substantial availability of cotton in the coming months and at lower rates also.
- The company imports wool from Australia and has covered 50-70% of the company’s requirement. However, with the depreciation of Aussies Dollar against USD, by around 24%, the company has incurred Rs 27 crore of loss and the other Rs 7 crore of loss is on mark to market investments; totaling to the total forex loss of Rs 33 crore.
- Wool prices have declined in AUD terms by 5% on sequential Q-o-Q basis.
- Vapi Phase III project progressing as per schedule, trial run targeted during Q4FY09.
- Sales of Files and Tools segment has grown at 30% on y-o-y basis and profitability as doubled to 12% from 6% on corresponding quarter of previous year.
- The export sales in this segment constituted 55% of total revenues, mainly from Latin America, Europe and Africa. Although volumes in Europe have decreased, sales have improved on y-o-y basis.
- The company has not passed on full benefit of fall in steel prices by around 22%. However, the prices on files and tools have improved in both domestic and export markets.
- The investment book of the company is around Rs 533 crore.
- The Debt on books at standalone front is Rs 1200 crore and consolidated is around Rs 1800 crore.