V-Guard Dec quarter net profit plunges 47 pc

Electrical goods maker V-Guard Industries today reported 47.4 per cent drop in December quarter net profit at Rs 9.23 crore due to poor sales, write-down on inventories and a 50 per cent hike in advertising spends.
The company's net profit in the same quarter a year ago stood at Rs 17.53 crore.
The company's Managing Director Mithun K Chittilappilly told PTI that during the reporting quarter, the company has written down around Rs 6.5 crore on its copper inventories, whose prices fell over 10 per cent during the period.
The Kochi-based company procures copper wire worth about Rs 65 crore every quarter, he said, adding that even in January the metal's price dropped by more than 15 per cent.

Another reason for the fall in bottomline is the almost 50 per cent increase in advertising spends to promote a new water heater the company launched.
Advertising spends during the quarter rose to around Rs 13 crore, up from around Rs 7 crore, Chittilappilly said, adding that sales also did not happen as projected.

Against a projected sales growth of 25 per cent, the company could manage only around ten per cent increase in sales during the quarter. In the first half, sales grew by over 25 per cent.
Even Diwali season sales did not happen as expected since consumers postponed their purchases in anticipation of a price cut due to falling copper prices, he said.

The only product which sold more than expected was the electric water heater, especially its new model called Pebble, he added.
This led to the company reporting only a little over 12 per cent growth in sales during the reporting quarter at Rs 395.37 crore, as against Rs 353 crore a year ago, he said.
However, Chittilappilly said that he expected sales to pick up in the seasonally busy fourth quarter.
He also expressed confidence that the company would be able to meet its full fiscal sales target of Rs 1,800 crore turnover. For the third quarter ended December 31, 2014, the company has clocked a cumulative turnover of Rs 1,280 crore.

Talking about capex plans, he said the company plans to increase cable capacity at its Coimbatore plant by around 300 tonne per month to 3,600 tonne per month, by investing around Rs 25 crore during the next fiscal.
Chittilappilly said business outlook remained positive.
"We continue to see an enhanced demand for certain categories of our products, considering the forthcoming season. We plan to launch mixer grinders in Karnataka and a new range of fans across Southern markets in Q4," he said.