Titan net profit slips 19% in festive quarter

Debt level drops to Rs 820 crore in December, from Rs 950 crore in October

Titan Co Ltd reported a third quarter profit that slipped 19% from a year ago on account of extremely poor retail sales during the quarter that saw the  festive and wedding season. "The sentiments in the market continue to be weak and the company witnessed an extremely poor retail-sales quarter for both its watches and jewellery businesses. The impact of festive season this quarter was much below our expectations,” Bhaskar Bhat, Managing Director of Titan said.

For the third quarter, the company reported a net profit of Rs 165.57 crore from Rs 203.92 a year ago. The net profit for the quarter was also hurt by  finance costs that more than doubled to Rs 27.39 crore in the quarter from Rs 11.69 crore in the previous quarter last year.

The company's operating profit slipped 14% to Rs 229.55 crore from Rs 268.56 in the same quarter last year. Expenses during the quarter dropped 11% of Rs 2446.22 from Rs 2749.24 crore a year.

Net sales in the third quarter dropped 11% to Rs 2650.46 crore from Rs 2982.89 in the same quarter last year.  The jewellery industry has been affected by the regulatory measures implemented by the Government of India and the RBI aimed at restricting gold imports. However, on a conference call with analysts, the company said its debt level had dropped to Rs 820 crore at the end of 2013, from Rs 950 crore a year ago as a result of the case realised from Diwali sales and the fact that is currently “stocked up.”

Sales in the company’s jewellery division which contributes to about 80% of its total revenue, fell by 15.4% in the quarter from a year ago to Rs 2126.67 crore. However, margins improved to 10.2%  in the quarter from 9.8% in the same period last year with the segment seeing a studded share of 26% in the third quarter.  

The company said it has resumed the sale of gold coins in its stores January as the Government had lifted an earlier directive preventing the same to curtail the burgeoning Current Account Deficit in the country. The sale of gold coins in this season typically accounts for 10-15% of the segment’s sales during the festive season.

Revenue in the watches segment rose 7.5% to Rs 455.48 crore despite a 10% drop in volumes and margins in the watch segment falling to to 11.3% to from 12.1%.

“Although the stock market has picked up, the high inflation levels have resulted in lower disposable income in the hands of consumers. In the last quarter of this financial year we have planned aggressive sales promotions for both watches and jewellery to stimulate demand and generate consumer interest in these categories,” Bhat said. “We will continue to
make adequate investments in mass communication and build our brands.”

Shares of the company dropped 1% to close at Rs 214.55 Wednesday on the Bombay Stock Exchange.