Loss of production and sluggish domestic demand hit growth in net profit for many denim fabric and apparel makers in the quarter ended June.
For Arvind Ltd, it was a month’s strike that resulted in output loss. For KG Denim, it was a decline in domestic demand for the fabric and apparel.
Arvind posted a 48 per cent dip in net profit at Rs 32 crore, down from Rs 61 crore for the corresponding quarter in 2011-12. Jayesh Shah, director and chief financial officer, said: “We had an abnormal situation due to the strike in two of our plants and, hence, it will be not appropriate to compare these results with that of the previous year...Our textile business is witnessing strong growth and we are confident that in the coming quarter, there will be growth in volume as well as margins.”
KG Denim 's net profit for the first quarter of 2012-13 was Rs 2.05 crore as against Rs 2.32 crore for the corresponding period last year, a dip of 11 per cent. The Coimbatore-based manufacturer's revenue, however, rose 23 per cent to Rs 114.7 crore for the first quarter, compared to Rs 93 crore for the same quarter in 2011-12.
"The later part of the fourth quarter of the previous fiscal and the first quarter of the current fiscal saw considerable dip in domestic demand. Increased dependency on the domestic market since some time did us in," said an official at KG Denim, adding the demand at home was down by 15-20 per cent. The industry manufactures 900 million metres of denim fabric per year, 650 million metres of which is marketed domestically.
Kewal Kiran Clothing, which makes denim and other apparel, saw net profit decline 42 per cent. The company, which runs brands such as ‘Lawman Pg3’ and ‘K-Lounge', posted a net profit of Rs 7.3 crore for the quarter ending June, compared to Rs 12.6 crore in the corresponding quarter previous year. Revenue also declined 18 per cent to Rs 56.9 crore for the first quarter, as against Rs 69.3 crore last year.
P R Roy, senior textile consultant, says the advent of new companies in the denim market has put pressure on the existing ones. "There have been three-four new players, led by Pratap Denim, that have been manufacturing and marketing denim fabric and apparel at competitive prices. This has put pressure on the older ones to bring down their prices, thereby impacting their margins," he added.
Around 3,000 workers at Arvind's Naroda plant were on strike between the first and fourth weeks of June, resuming work only on June 29. The plant makes denim fabric of 89 million metres out of Arvind's total 108 million metres capacity. Arvind, one of the largest integrated textile and branded apparel companies, also saw a four per cent decline in revenue for the quarter. Against Rs 1,211 crore for the corresponding period of June 30, 2011, it recorded a revenue of Rs 1,157 crore for the quarter ended June this year. Operating profit for the quarter was Rs 129 crore.
Shah added that despite a reduction in selling prices by 10-14 per cent in various textile products, caused by a fall in cotton prices, the quarter’s revenue was strong on account of robust growth in textile volumes and a nine per cent increase in revenue of the brand & retail business.