MUMBAI, June 5: Arvind Mills Ltd, hit hard by lower value realisations in denim, has reported a whopping 20.7 per cent drop in its net profit. The Lalbhai group flagship posted a net profit of Rs 101.04 crore for the year ended March 31, 1998, against Rs 127.40 crore a year ago.The company board has recommended a sharp cut in dividend to Rs 2.50 per share from Rs 4.50 per share in 1996-97. The company has clocked a sales turnover of Rs 928.3 crore, up 7.5 per cent. Earnings per share dropped to Rs 10.05 from Rs 12.67, according to a press release.
Gross profit crashed to Rs 183.20 crore from the previous year's Rs 202.79 crore. Other income came down to Rs 27.72 crore from the previous year's Rs 31.49 crore. Expenditure rose to Rs 768.94 crore from Rs 676.40 crore a year ago. Interest plummeted to Rs 3.90 crore from Rs 15.45 crore.
Depreciation went up sharply to Rs 72.73 crore from Rs 57.77 crore on account of the commissioning of 40-million-metre rope-dyeing denim plant. Tax stood at Rs 8.25 crore,against Rs 5.42 crore. Paid-up equity share capital was maintained at Rs 100.55 crore. Reserves (including revaluation reserve) stood at Rs 1050.98 crore, against Rs 978.15 crore. Export earnings fell to Rs 396.79 crore from Rs 405.07 crore.
Over-capacity in the global denim market, increasing demand for twills and gaberdines and lower international cotton prices that resulted in depressed global denim prices have been cited as other factors responsible for lower sales growth.
The rope-dyeing plant, expected to be fully operational by the first quarter of 1997-98, was fully utilised on September 1997. The delay was owing to high degree of automation and longer training period, says the release.Though denim sales volumes have picked up in the current year, prices continue to remain weak.
The company hopes to cash in on the benefits arising out of the commissioning of the new shirting and knits complex, the release adds.Insight
Thanks to increasing competition, sales growth has declined to 7.55per cent from 21 per cent in 1997. While competition has hit sales growth, rising cotton prices have affected the operating profit margins, which have fallen from 21.63 per cent to 17.16 per cent.
Had the interest burden not declined sharply, the fall in profits would have been much sharper. Lower exports have also affected growth.
However, focus on value- addition and the falling value of rupee are likely to help the company in the current year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
