The footfalls in the stores of Aditya Birla Nuvo (ABNL) are believed to have fallen in the June 2008 quarter while garment manufacturer Kewal Kiran, which retails the bulk of its products, has seen sales come off by over 20 per cent. Clearly, consumers are not in a mood to spend, though some players such as Raymond and Arvind have seen their branded apparels selling well. On balance, it hasn’t been too bad a time for textile and apparel makers in terms of the top line.
The problem lies in the higher input costs – cotton chemicals and power — which have pushed down the operating profit by 13 per cent for the sample. With consumer demand a trifle weak, not all manufacturers have been able to pass on the increased input costs. Raymond, for instance, has got the denim blues: operating losses grew to Rs 14.4 crore in the June 2008 quarter from Rs 2.1 crore last year.
However, Gokaldas saw its operating profit margin go up 740 basis points at 15.4 per cent, while terry towel and bed linen maker Welspun India was able to keep raw material costs in check and expanded its margins by 580 basis points. Exporters, however, could be in some trouble with demand both in the US and EU slowing down. In July, for instance, Gokaldas’ largest overseas customer reported an 11 per cent drop in the sales growth.
The forex losses on derivatives and hedging were quite prominent this quarter but some companies like Bombay Dyeing, which posted a Rs 18.8 crore hedging loss, have not charged this to the profit and loss statement but adjusted it against reserves. Nevertheless, net losses for the sample are up sharply, driven by higher depreciation, higher interest costs and a lower other income.