India - Textile And Clothing Firms Hit By High Cotton Inventory, Dull Market In ...
Dated- 16 Aug , 2012 - India
In the wake of high cotton inventory and dull overseas market, major textile and clothing (TandC) companies like Arvind, Alok, Raymond, Century and Gokaldas Exports have taken a hit on their bottomline in varying degree for the first quarter of fiscal 2012-13 on a year-on-year basis.
While for Arvind it was labour strike impacting operations, for Gokaldas Exports it was the increased competition in overseas markets from the likes of Vietnam and Bangladesh. A look at just the net profits or net losses of some of the major TandC firms shows either a dip in the former or a growth in the latter.
For instance, the likes of Arvind, Alok Industries and Century Textiles have seen their net profit for Q1 of FY 2012-13 decline by 31.46, 49 and 90 per cent, respectively. On the other hand, Raymond and Gokaldas Exports registered an increase in their net losses by 442 and 75 per cent, respectively. According to industry experts, while for TandC firms that primarily manufacture garments or have apparels as one of the major integrated operations have lost substantial competitiveness in the overseas markets.
"Not only has been the domestic market dull since last couple of months due to poor market sentiments, but even the overseas market has become tougher in terms of competition from Vietnam and Bangladesh that sell at much competitive prices. Add to that, the fabric prices and power costs have also risen pretty high for garmenters in India," said DK Nair, secretary general of Confederation of Indian Textile Industry (CITI).
Which is why, Raymond's segment-wise bottomline posted a dip in both 'textile' and 'garment'.
The integrated TandC company's textile segment saw a net loss of Rs 8.62 crore for quarter ended June 30, 2012 as against a net profit of Rs 24.13 crore for the corresponding period last year. In the 'garment' segment, Raymond posted a dip of 55 per cent in net profit for the said period.
In case of integrated textile and branded apparel player Arvind Ltd., almost a month long strike at its denim fabric manufacturing plant at Naroda in Ahmedabad took a toll on its net profit for the first quarter of fiscal 2012-13. The company posted a 48 per cent dip in its net profit at Rs 32 crore, down from Rs 61 crore for the corresponding quarter in previous fiscal 2011-12.
However, commenting on the results, Jayesh Shah, Director and Chief Financial Officer of Arvind Ltd. said, "We had an abnormal situation due to the strike in two of our plants and hence it will be not appropriate to compare these results with that of previous year. Our textile business is witnessing strong growth and we are confident that in coming quarter there will be growth in volume as well as margins."
According to experts, for some TandC players, high cotton inventory costs has still been playing a role in the said quarter's financial results.
"Last year, cotton prices had risen substantially at a time when the cotton season had just begun, thereby leaving textile companies with high cotton inventory costs. For some companies, the effects of the high inventory costs must have played a part in eroding the net profit," said PR Roy, senior textile consultant.