The Hindu Business Line : Arvind Mills net plunges 17 pc despite higher sales

A 14 per cent rise in sales could not sustain the profitability levels for the Ahmedabad-based Arvind Mills Ltd as its net profit fell by 17 per cent during the second quarter of the fiscal.

Arvind's net profit stood at Rs 20.14 crore against Rs 24.31 crore during the corresponding period last year, despite its revenues rising to Rs 424.35 crore (Rs 370.57 crore).

The company blamed rise in the prices of cotton and naphtha for the reduced profitability. The operating profit for the quarter ended September 30, fell only marginally to Rs 91.54 crore (Rs 91.88 crore), but this came despite a Rs 53.78 crore rise in revenues.

"In spite of resurgent denim demand, the results of the current quarter were affected by increased input costs — fuel and raw cotton. While the shift from naphtha to gas in captive power plants would address the high power costs, the new cotton season would determine the future cost of cotton," said Mr Jayesh Shah, Chief Financial Officer and Director of AML.

In August, the company had announced plans to shift its existing denim and garments manufacturing facilities from Mauritius to India. The company, through its subsidiary companies, has 8 million metres of denim manufacturing facility and 2 million pieces of jeans plant at Mauritius.

Arvind Mills will augment its denim manufacturing capacity to 105 million metres in India after the plant is shifted by December 2004.

Similarly, the company is currently implementing a 2.1 million jeans plant at Bangalore, which will be increased to about 4 million pieces after shifting capacities from Mauritius.

Meanwhile, plans to switch Arvind's captive power plant, which currently uses naphtha as raw material, to gas has been delayed by a month. The Naroda unit is likely to use gas by first week of November 2004. The switch over to gas in Santej unit would be completed only by the third quarter of 2004-05.