Tile firms wilt under freight, input costs

The tile industry has recorded a decline in its growth rate in the April-June quarter of FY'06 as most of the medium and small tile manufacturers are showing signs of a slowdown.

Growing freight and input costs have impacted profit margins over the last two years. Most of the tile manufacturers have recorded negative growth in net sales during the quarter compared with the January-March quarter of FY05.

In the north, the biggest recession in net sales was suffered by Kajaria Ceramics with 27.7 per cent fall in net sales compared to its sales during the previous quarter. While net sales of SPL Ltd has gone down by 2.7 per cent, Orient faced a 13.5 per cent slump in sales.  

Regency Ceramics, a key player in the south region, saw net sales falling by a critical 32.5 per cent over its net sales during the previous sequential quarter. The other south-based tile manufacturer, Murudeshwar Ceramics has recorded an 8.1 per cent fall in net sales during the first quarter of FY06 over its sales during the previous sequential quarter.

In the west, Bell Ceramics recorded a 5.3 per cent fall in sales during the first quarter of 2005-06 over it sales during the previous sequential quarter. However, H&R Johnson (India) Ltd, which operates across the country, has declared a positive growth with a 9.5 per rise in net sales.

The strong performance of H&R Johnson (India) is attributed to its focus in the north. According to ceramic trade estimates, the growth in sales of H&R Johnson (India) Ltd has also propelled its north market share from 9 per cent to 12 per cent in three months. It is expected that tile companies should record 15-20 per cent growth over corresponding quarters to sustain profitability.

On a yearly basis, Kajaria's net sales in the April-June quarter have grown by a 8.4 per cent over the corresponding quarter last year.

SPL has recorded a net sales growth of 16.3 per cent while Orient recorded a 11.8 per cent growth compared with its sales in the corresponding quarter last year. H&R Johnson (India) witnessed an overall 29.7 per cent growth in net sales over the same period while Regency recorded a fall in net sales of 12.3 per cent.

The major downturn in growth for Kajaria, SPL and Orient is attributed to the lack of expansion into other regional markets. These three companies are almost non-existent in the southern and western markets.