Coats Viyella

With the domestic market for threads growing at a slow rate, CVIs sales grew by just 6.5 per cent to Rs 969.71 crore in 1997. It had achieved a 8.5 per cent growth the previous year, despite its operations being affected by power shortages in Tamil Nadu.

The company held out in the past aided by contribution from exports. However, analysts feel the Asian crisis has dampened the short to medium term export performance of the company, especially in threads.

The higher excise duty in the major business, sewing threads, continues to hamper its pricing strategy for the product. With the prices of raw materials like cotton and man-made fibre remaining firm, the operating profit margin remained almost stagnant at 7.7 per cent against 7.4 per cent last year. Margins were also affected by the higher employee cost. This is set to improve as the company has pruned its workforce to 12,750 in 1997 from 14,500 the previous year. This is expected to come down further to 8,500 in the current year.

 

Though net profit improved substantially, the equity dilution after the rights issue has affected earnings growth. Its 1997 earnings per share moved up only 47 per cent to Rs 2.8 despite a 122 per cent increase in net profit. Also, around 70 per cent of the total rights issue proceeds at Rs 110 crore were earmarked for loan repayment and augmenting working capital, which left little for gross block addition.