Export performance of denim companies boost Q3 profits

Indian denim manufacturers are facing low demand and oversupply situation in the domestic market. But their efforts to explore untapped export destinations, companies like Arvind, Nandan Denim (NDL) and KG Denim were able to book profits in the third quarter of fiscal 2014. They also invested in capacity expansion of their units to cater to export orders for value-added products, which helped them perform well during the quarter under review.

Focus on exports boosts margins

NDL was able to increase its net profit by whooping 38 percent for third quarter ended December 31, 2014 of fiscal 2015-16. Driven by its export performance, the company, a part of Chiripal Group reported a Q3 net profit of Rs 12.63 crores in FY '15 against Rs 9.15 crore in the corresponding period last year. Net profit of another leading player, KG Denim too soared 215 percent in Q3 for FY'15 against a net profit of Rs 1.62 crore for the same quarter, last year. The company reported a net profit of Rs 5.11 crore for the corresponding quarter ended December 31, 2014.

And textile major Arvind too witnessed healthy growth in its overall net profit for the third quarter of fiscal 2014-15. The company, which supplies to major global brands in the US, Europe and Asia, among others, posted a 6.78 percent growth in its consolidated net profit for the third quarter. The company's Q3 net profit of fiscal 2014-15 grew to Rs 109.10 crores, up from Rs 102.17 crores for the corresponding quarter last year. Also its total consolidated income grew by 17.08 percent at Rs 2088.73 crores for the quarter compared to Rs 1783.90 crores for the quarter ended December 31, 2013.

Capacity building improves profitability

While capacity expansion was one of the reasons behind improved profit margins at NDL, the company has also maintained a long-term focus on sustainable and profitable growth with a capacity expansion plan of Rs 612 crores. While as on November 2014, it invested Rs 262.53 crores, the capex is scheduled to be completed by March 2016.

The company believes that by establishing its capacity, it would not only be able to further penetrate into the export markets but also strengthen its domestic market share and value-added segments.

The CMAI’s Apparel Index revealed for the third quarter from October to December 2014, players realized the need to invest to grow their businesses, which also shows their confidence in the market. On the whole 78 percent of the brands surveyed said that they increased their investments, one third of them to the extent of 21-40 percent or more.