Arvind slides as PAT tumble 40% YoY in Q1 FY25

Arvind slipped 3.26% to Rs 374.10 after the company's consolidated net profit dropped 40.32% to Rs 39.31 crore in Q1 FY25 as against Rs 65.87 crore recorded in Q1 FY24.

Revenue from operations decreased 1.22% year on year (YoY) to Rs 1,830.60 crore in the quarter ended 30 June 2024.

Profit before tax slumped 40.93% to Rs 54.31 crore in June 2024 quarter from 91.94 crore posted in same quarter last year.

EBITDA stood at Rs 150 crore in first quarter of FY25, registering de-growth of 17% YoY. EBITDA margin reduced to 8.2% in Q1 FY25 as against 9.7% reported in corresponding quarter previous year.

 

EBITDA margin had a significant reduction due to decline in volume and resultant under absorption of elevated overheads. We are taking measures to optimize cost wherever possible to safe guard the margin in quarters ahead, the firm stated.

The first quarters financial performance and growth were impacted by the National General Election and an illegal worker's unrest, impairing the performance at the Santej factory for 21 days. However, the strike has been called off, and workers have gradually resumed duty, restoring normalcy to operations.

The strike affected the businesses resulting in capacity loss and challenges in executing existing orders. The strike had an approximate impact of Rs 200 crore on revenue and Rs 60 crore on EBITDA, including about Rs 11 crore in increased costs such as air freight and additional worker costs incurred to mitigate the strike's effects.

The garment maker stated that as guided, double-digit growth of 25% in volume was achieved by the garmenting division. New customer addition and expansion into new categories in the knits garment were also seen in the segment, which is a result of verticalization strategy.

The AMD division experienced partial impacts from the aforementioned strike, particularly affecting the human protection subsegment, which relies on the Woven segment for its fabric requirements. Additionally, it is important to note that the election season has led to the deferment of orders in some segments, such as mass transport, which depends on order flow from PSU customers. These deferments have resulted in lower operational and financial performance. However, the outlook for the subsequent nine months is better than expected.

Textile division revenue stood at Rs 1,350 crore with an EBITDA of Rs 99 crore translating in to the EBITDA margin of 7.4%. Advance material division reported revenue of Rs 329 crore in Q1 FY25 with an EBITDA margin of 13.9%.

The textile producer said As guided earlier this was to be a year of higher growth capex to augment our Garmenting and AMD capacity, however we have slowed down our allocation by postponing few programs by few months in view of the recent events to preserve cash. We have since restarted the investment process and are confident that we will hit the desired allocation by the end of this year.

The company has preserved the momentum on debt reduction, the gross debt has reduced by Rs 55 crore, though the long term debt increased by Rs 64 crore. This is on account of new longterm loan of Rs 150 crore taken for creation of a war chest to deal with the unfolding situation, of this Rs 100 crore has since been repaid.

Explaining its guidance for FY25, the company said, We have invested in significant resources and efforts to secure larger and better orders by increasing its marketing initiatives. We anticipate fabric volumes to return to normal levels for the remainder of the year. In garmenting, the firm expects to achieve a volume of nearly 10 million pieces per quarter and attaining nearly 25% growth.

The AMD segment is projected to perform well and as guided it is expected to recoup its losses in quarters two and three and return to a 20% growth track. Following the guidance provided in Q4 FY24, we have embarked on a discretionary capex program, budgeting Rs 400 to Rs 450 crore for FY25, which is on track.

With a reasonably strong order book position, we remain hopeful of achieving low double-digit revenue growth for FY25, maintaining or marginally improving our margins, and enhancing our ROCE.

Arvind is one of Indias leading vertically integrated textile company with the presence of almost eight decades in this industry. It is among the largest denim manufacturers in the world. It also manufactures a range of cotton shirting, denim, knits and others.

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