Indian textile firms Q2 net profit affected over erratic costs and demand cycle

India is the second largest producer of textiles and garments in the world. The Indian textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021. But during the Q2 of financial year due to several factors including stiff competition in certain products, low capacity utilization, high inflation, high interest rates and weakened rupee has impacted in some way or the other on be it textiles, polyester yarn, fabrics or apparel players.

Erratic costs and demand cycle has had an impact on books of several textile companies. They have either seen a decline in their net profits or a marginal rise for the second quarter ended September 30, 2014.

For instance, Raymond Ltd posted a 26 percent decline in its net profit at Rs 68 crore for Q2 of fiscal 2014-15 as compared to Rs 92 crore for the corresponding period last year. While the textiles segment of Century Textiles Industries Ltd saw its net profit decline by 24.71 percent at Rs 32.90 crore, that of Vardhman Textiles Ltd dipped by 48.42 percent at Rs 91.70 crore.

Gautam Hari Singhania, chairman and managing director, Raymond Ltd said that during the quarter ended September 2014, while revenue growth was in line with their expectations, profitability did not meet their desired targets, particularly in branded textile segment and engineering businesses.

Though due to change in accounting period the year to date for previous accounting year with the current year was not comparable for Alok Industries, the company posted a net profit of Rs 45.36 crore for the quarter ended September 30, 2014 whereas the same was at Rs 96.98 crore for the quarter ended September 30, 2013.

Indo Rama Synthetics (India) Ltd. continued to be impacted by raw material price volatility as well as anti-dumping duty imposition on PTA.

According to Indo Rama Synthetics (India) Ltd., the polyester industry is undergoing a very challenging phase due to the economic environment created after the imposition of anti-dumping duty on PTA by the government which has resulted in an increase in the cost of raw material.

OP Lohia, chairman and managing director of Indo Rama Synthetics (India) Ltd said that as one of the leading player in market , their performance reflects the industry situation. While the sentiment around business environment is showing signs of improvement, the duty structure on PTA is hampering the growth of the domestic polyester industry.

They look forward to positive policy framework under the Make-In-India campaign and expect policy support in order to help the domestic polyester industry in showcasing its capability and prowess to deliver better returns to all the stakeholders.

Some improved performance was seen by Arvind and Kewal Kiran Clothing Ltd. (KKCL), with marginal growth rates of 4.13 per cent and 3.10 per cent, respectively.