Higher raw materials, power cost pull down Welspun net 22.6%

Textiles firm Welspun India today reported a 22.6 per cent decline in net profit at Rs 154.5 crore in the March quarter and blamed the same to higher raw material and energy costs.
The city-based company, that draws it maximum revenue from exports, had posted net profit of Rs 199.53 crore in the same period a year ago.
Total income increased by 8.1 per cent to Rs 1,772.71 crore during the quarter under review as against Rs 1,639.38 crore during the same period previous fiscal.
For the full fiscal 2017, consolidated net profit grew to Rs 362.37 crore from Rs 749.12 crore, while total income rose to Rs 6,721.09 crore from Rs 6,014.29 crore.

"The sharp jump in cotton prices had impacted our profitability. Operating EBITDA was down at Rs 382.9 crore in Q4 from Rs 435.3 crore a year ago, which was adversely affected due to a sudden spurt in raw material and energy costs," Welspun India Chief Financial Officer Altaf Jiwani told reporters here.
During FY17, the company spent Rs 720 crore towards total capital expenditure.

The annual capacity as on date has been enhanced to 72,000 mt in towels from 60,000 mt, 90 million metres in bed linen from 72 million metres and 10 million sq. Metres in rugs and carpets from 8 million sq. Metres at end-FY16.

For FY18, capex is expected to be around Rs 700 crore, which will be mainly for enhancing towel capacity to 80,000 mt and for the ongoing flooring solutions project. The flooring solutions project is on track and is expected to be completed by Q2 of fiscal 2019, Jiwani said.
"The industry is facing significant head winds in terms of raw material, energy cost pressures as well as rupee appreciation which will keep the margins under pressure and we will see a muted growth during FY18," Jiwani said.
The company is well-placed to face challenge with its differentiation strategy of innovation, branding and sustainability, which it has been pursuing for quite some time now, Joint Managing Director Dipali Goenka said.

The company is planning price hikes on some items and launching new products in the current fiscal. It has vision to expand domestic portfolio to 20 per cent by 2020 from the present 5 per cent, she added.
Commenting on the Egyptian cotton issue, the company said all four putative class action suits filed during the previous quarters in the US against it and its subsidiary Welspun USA Inc by some consumers are proceeding as a single putative class action suit now.
During the March quarter, a consolidated amended complaint was filed for the action and the parties concerned have agreed to conduct a time-bound mediation, it said.