Higher input costs impact synthetic yarn makers' Q2 results

For the second consecutive quarter, synthetic yarns makers have seen poor financial results. Players like Indo Rama, Alok Industries and Raghuvir Synthetics cite weak demand and rising raw material prices for the scenario.

According to industry players and experts, the rise in prices of PTA and MEG, two major raw materials used in making synthetic yarn saw a steep rise thanks to rupee fluctuations.

"Mostly people import PTA and MEG for making synthetic yarn. For the second quarter, people had imported the raw materials when the rupee level was ' 55 but after the credit period when they had to make payments the rupee value against dollar shot up to ' 65. Even in India, the melt cost for PTA and MEG were as high as ' 97 per kg for almost the entirety of second quarter," said Jayesh Pathak, president of Bombay Yarn Traders Association.

Pathak added that the melt cost for PTA and MEG have only recently come down to ' 84 per kg.

Such has been the impact on the quarterly financial results on the synthetic yarn such as polyester making companies that Indo Rama Synthetics (India) Ltd., for instance, posted a net loss after tax of ' 61.36 crore for second quarter ended September 30, 2013 as against a net profit of ' 103.59 crore in Q2 of previous year.

"Our performance for this quarter has been delivered in the face of a continuing difficult macro environment. Demand has decreased significantly resulting in lower off take. The volatility of Indian currency has also increased the cost of our imported inputs and resulted in forex loss," said OP Lohia, Chairman & Managing Director, Indo Rama Synthetics (India) Ltd.

The rupee fluctuation also took a toll on Alok Industries' financial results for the second quarter. From a net profit of ' ' 289.62 crore in Q2 of previous fiscal 2012-13, Alok Industries registered a decline in net profit by 67 per cent at ' 96.98 crore for the second quarter ended September 30, 2013.

"There was a rise in raw material prices coupled with rupee fluctuation that impacted our financial results for the second quarter. Though we manufacture synthetic yarn for our captive consumption it impacted us due to rise in input costs," said Dilip Jiwrajka, managing director of Alok Industries.

The company produces synthetic yarn of 42000 tonnes per annum quantity.