Raw materials price rise impact export margins of synthetic yarn makers in April-June quarter

According to industry players, raw materials, especially for synthetic yarn such as PTA and MEG have risen by more than 20% in some cases

While the rupee depreciation has helped cotton yarn exporters reap benefits, synthetic yarn exporters have failed to do the same due to price pressure in raw materials. Resultantly, several yarn players have seen an impact on their June quarter results this fiscal.

According to industry players, raw materials, especially for synthetic yarn such as PTA and MEG have risen by more than 20 per cent in some cases.

For instance, Indo Rama Synthetics (India) Limited, India's largest dedicated polyester manufacturer, saw its net loss at Rs 30.03 crore for quarter ended June 30, 2013 as against Rs 26.10 crore in Q1 FY 2012-13.

As per Indo Rama Synthetics, results of this quarter were impacted by the volatility in the Indian Rupee resulted in forex loss due to the mark-to-market adjustment. With the rupee expected to stabilize, due to the number of measures being initiated by government, this will improve the profitability in the coming quarters. "Currently, the Indian economy is passing through a difficult phase with business activities at a lower side for most of the sectors due to depreciation in the value of rupee, rising crude oil prices and increasing raw material costs. However, the market conditions for the man-made fibres are showing signs of improvement and we are hopeful that the demand for polyester will pick up in the months to come. With demand going up in the domestic and international market, we are hopeful that we will be able to utilize higher production capacity in the following quarters," said OP Lohia, CMD of Indo Rama Synthetics (India) Limited.

Similarly, Ahmedabad-based Raghuvir Synthetics Limited registered a net loss of Rs 10.98 lakh in the June quarter as against a net profit of Rs 9.27 lakh in the said quarter last year. Even Alok Industries saw its net profit rise marginally from Rs 30.07 crore in Q1 of previous fiscal 2012-13 to Rs 32.91 crore in the current fiscal's Q1.

"The PTA and MEG prices, which are basic raw materials for polyester yarn have seen a tremendous rise, thereby impacting yarn and fabric prices," said Dilip Jiwrajka, managing director of Alok Industries. Moreover, according to polyester yarn, cotton yarn and denim fabric player Suryalakshmi Cotton Mills Limited, firms were not able to leverage the rupee depreciation to much extent.

"The rupee depreciation should have rung cash registers for yarn exporters. But in polyester, the raw material prices have increase by more than 20 per cent, thereby impacting the margins that one could have earned in exports due to rupee depreciation," said Paritosh Aggarwal, managing director of the Rs 700 crore Suryalakshmi Cotton Mills Limited.