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Titan Co Ltd posted muted growth in the second quarter, weighed down by a cutback in consumer spending resulting in a decline in demand for jewellery and other discretionary items in the three months ended September 30.
The company said its net profit has grown 3.6% to Rs 186.65 crore in the second quarter, up from Rs 180.17 crore in the comparable period in 2012.
Titan's revenue for the second quarter increased 1.4% to Rs 2,290 crore from Rs 2,258 crore in the last year. Total operating income grew 4.4% to Rs 246.83 crore for the company in the July-September period.
"This was a challenging quarter on account of weak consumer sentiments, particularly for discretionary purchase categories like watches and jewellery. The continued inflation and the weak rupee are affecting demand as well as costs and interest rates that continue to be at high levels," said Bhaskar Bhat, managing director, Titan Company.
The company's short term borrowings, nil at the start of the year, stand at Rs 606 crore at the end of the second quarter.
Jewellery fails to dazzle
The company's jewellery division that contributes to the lion's share of its total revenue, failed to hold on to its growth in the first quarter of this year and posted a decline of 31% on a sequential basis to Rs 1,798 crore in the second quarter.
The company has been plagued by regulatory issues relating to gold, resulting in a shortage of gold against growing demand from consumers. The RBI crackdown on gold imports, one of the largest contributors to the Current Account Deficit, had Titan also mulling the use of its direct import license to curtail the effects of the problem.
The company, which sells jewellery through its Tanishq retail stores, however, saw the division grow 4% from about Rs 1,724 crore in the last year, buoyed by sale of diamonds which gained traction on a discount programme and the launch of a new line -- Inara.
The share of sale of diamonds increased to 37% of total jewellery sales in the second quarter from 16% in the first. Margins in the jewellery division increased by about 1% buoyed by the sale of more diamond jewellery
Sales of watches drop
Titan's watch division also registered a drop of about 6% in sales to Rs 442 crore in the second quarter as consumer cut back on the purchase of discretionary items. Sales volumes in the segment dropped 22% and margins slipped to 10.5% from 11.6% on higher costs and lower sales.
Shares of the company closed at Rs 266.30 apiece, up 4% on Thursday on the Bombay Stock Exchange.
