New Delhi, Dec 6: After a disastrous first half, the Sanjay Lalbhai-group flagship Arvind Mills is on a comeback trail. It is expected to return to the profit charts with marginal profits in the last two quarters of the current financial year. "Although the company may not be reporting profits in the full year, but Arvind Mill is expected to fare exceptionally well in the next financial year," Arvind Mills group chief executive, PR Roy, told The Financial Express.On the back of higher capacity utilisation, lower cotton prices and higher value addition, the company is expected to report substantial improvement in earnings. Further, the company is focussing on exports and the exports content in the total turnover is expected to improve from the current level of 43 per cent to around 65 per cent in the coming times.
``Cotton prices over the past few months has dropped by over 15 per cent and since cotton accounts for close to 60 per cent of the product cost, the margins are expected to improve substantially'', said Roy. Arvind Mill's knitting capacity is expected to improve from the current 40 per cent to over 70 per cent and the trousers division at Santej from 65 per cent to over 100 per cent. Better capacity utilisation in various divisions is expected to result in higher turnover from Rs 940 crore to around Rs 1,200 crore in the current financial.
Arvind Mills' sales mix in the past few months has also changed in the favour of cotton gaberdines and out of the total denim capacity of 110 million meters, cotton gabardines account for more than 35 million meters.
``There is a definite shift in the demand for gabardines or the khaki trousers and we will be adjusting our production as and when required. Shift in favour of gabardines augur well for the company which yield better realisations'', said Roy. Arvind Mills reported a net loss of Rs 103.10 crore for the first half ended September 1999, against a profit of Rs 15.28 crore in the corresponding period the last fiscal. This is despite a 16 per cent rise in its turnover to Rs 540.52 crore, from Rs 464.20 crore in the year-ago period.
Lower capacity utilisation in its new projects, coupled with underperformance in the denim unit, besides higher interest and depreciation charges led to the company's dismal performance.
The Rs 1,200 crore greenfield venture with a state-of-the-art high value cotton shirting facility, which commenced commercial production in April this year, will take Arvind's total capacity to 34 million metres per annum and knitted fabric to 16,000 pieces per day.
The company has already converted 30 per cent of its capacity to produce gabardines, while another 20 per cent is now earmarked for producing speciality products like stretch denim, ring denim and tencel, where competition is less.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.