Tuesday, November 07, 2006

Arvind Mills Financials

The Business Standard is reporting about Arvind Mills from Mumbai.

A deterioration in business environment in its key segment-denim-resulted in a worsening of Arvind Mills?financials as its standalone sales declined 8.3 per cent y-o-y. Operating profit margin declined 308 basis points y-o-y to 21.83 per cent.

Denim volumes fell 18 per cent and prices declined 8.9 per cent on a y-o-y basis. Even in the June quarter, volumes and realisations had dropped 20 per cent and 12 per cent respectively.

Denim prices declined to Rs 90 a metre- the lowest price in five years. Demand for the shirtings fabric business improved from the garment division, but realisations, declined by 0.8 per cent sequentially.

Arvind has increased its focus on garments business in Q2 FY07, the contribution of garments increased to 19 per cent of sales, up from 17 per cent in Q1 FY07 and 11 per cent in Q2 FY06.

Its branded apparel subsidiary, Arvind Brands, hived off five international brands (including Lee and Wrangler) to a JV with VF Corporation, where the latter will own 60 per cent for which it received about Rs 148 crore.

The management believes it will take 12-15 months for the pressure on revenues and net profit to ease. Cotton prices are slightly higher this quarter and fuel costs will stay high due to inadequate gas supply.

The Arvind stock has halved over the past year, and even at the current price of Rs 59, it trades at an expensive 24 times FY07 earnings.

Business Standard Article

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