arvind mills investor present a ti ion
TRANSCRIPT
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A R V I N D L I M I T E D
Arvind Limited
INVESTOR PRESENTATION
25
th
October 2008
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Financial Performance
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The Arvind Mills Limited In spite better operational
performance the earningsof the company continueto be depressed on
account of rapid rise inthe input cost of cottonand power
The major contributory tothe lower performance is
the interest cost alongwith the loss on accountforeign exchangetransactions andoutstanding
Other income is onaccount of profit from saleof land and sale of sharesin company which holdsanother piece of land
Q II
Particulars 2008-09 2007-08 Change %
Net Sales/Income from Operations 599 564 6%
Other Income 35 2 2050%
Revenues 634 565 12%
Total Expenditure :
Consumption of Raw Materials 218 209 4%
Employees Cost 63 60 6%
Power & Fuel 74 47 57%Stores Consumption 65 62 5%
Other Expenses 114 107 6%
EBIDTA 100 80 25%
Interest & Finance Cost (Net) 66 34 97%
Cash Accruals 34 46 -27%
Depreciation/Impairment 29 35 -16%Exceptional Items 2 0
Profit from Ordinary Activities before tax 2 11 -80%
Taxes 1 1
Net Profit from Ordinary Activities after tax 2 11 -84%
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Arvind Mills Sales Mix
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Debt Profile
Long term borrowings also include borrowing
under TUF scheme amounting to Rs. 244 Crores
Statement of Total Borrowing as on 30-09-2008 Rs. In Crs
In Rupees Rate of Int In FC Rate of Int Total Rate of Int
Long Term Debt 1086 8.60% 146 7.82% 1231 8.51%Working Capital Debt 419 10.35% 300 7.00% 719 8.95%
Total 1505 9.09% 446 7.27% 1951 8.67%
Borrowing Proportion 77% 23%
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Business Analysis
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Denim
The realization in denimbusiness continues to go up asthe product mix continues toimprove
The cost escalation envisaged
for cotton might not be as highas originally anticipated
The key markets of US and
Europe are in flux andmaintaining the volumes atcurrent level will be a hugechallenge for the business
20.85
19.3418.60
20.12
16.22 16.2117.22 17.49
93
100 103 10296
105109
114
0
20
40
60
80
100
120
0.00
5.00
10.00
15.00
20.00
25.00
Oct -Dec 06 Jan - Mar 07 Apr - Jun 07 Jul-Sep 07 Oct -Dec 07 Jan -Mar 08 Apr -Jun 08 Jul-Sep 08
Denim Volume & Realisation
Volume Real isat ion
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Shirting
The business is doing well even in
face of stiff competition and
operational parameters are stable
The business continues to sufferfrom further 17-18% increase in
the cost of energy
With the cotton situation lookingup the cost of raw material is notof concern anymore
5.12
5.92 5.88 5.896.26
5.395.90
5.56
121
116
126
121
129
133 134 133
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
105
110
115
120
125
130
135
140
Oct -Dec 06 Jan -Mar 07 Apr -Jun 07 Jul-Sep 07 Oct -Dec 07 Jan -Mar 08 Apr -Jun 08 Jul-Sep 08
Shirting Volume & Realisation
Volume Real isat ion
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Shirts
The business continues to dowell in the current quarter andthe realization is at historicalhigh in rupee even at theRs.40 to dollar
The drop in volume is primarilydue to change in product mixand a sluggish July month
0.57
0.700.76
0.970.91 0.89
0.96
0.69
400 396
362 360 357
387 387406
100
150
200
250
300
350
400
450
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Oct -Dec 06 Jan -Mar 07 Apr -Jun 07 Jul-Sep 07 Oct -Dec 07 Jan -Mar 08 Apr -Jun 08 Jul-Sep 08
Shirts Volume & Realisation
Volume Real isat ion
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Jeans
The average realizationcontinue to improve throughthe quarter
The volumes are lower duringthe quarter due to productivity
losses and delay in certainorder
The business continues to be
impacted by shortage ofmanpower
0.44
0.63
0.92
0.780.83
1.01
1.281.21449
383407 397 401
346378
432
0
50
100
150
200
250
300
350
400
450
500
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Oct - Dec 06 Jan -Mar 07 Apr -Jun 07 Jul-Sep 07 Oct -Dec 07 Jan -Mar 08 Apr -Jun 08 Jul-Sep 08
Jeans Volume & Realisation
Volume Realisation
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Knits
The new management team atknits is delivering very goodresults and has brought aroundtremendous operationalimprovements
The order book position isrobust and profitable
Certain structural changes are
likely to bring further costbenefits in the business
0.84
1.18
1.45
1.68
1.43
1.24
1.54
1.88
156
190
175
157 155
197187
175
0
50
100
150
200
250
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
Oct -Dec 06 Jan -Mar 07 Apr -Jun 07 Jul-Sep 07 Oct -Dec 07 Jan -Mar 08 Apr -Jun 08 Jul-Sep 08
Knits Volume & Realisation
Volume Real isat ion
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Brands & Retail
The sales have increased by 37%
over corresponding quarter
previous financial year
Two more large format MegaMartwere opened in Pune and
Bangalore during the quarter
The first MegaMart 100% privatebrand showroom was opened
The first franchisee MegaMart
show room was opened
Decision to convert Excalibur and
Newport as private brands ofMegaMart was implemented
79.85 80.3770.79
100.59112.02
132.87
95.93
138.19
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Business Environment
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Foreign Exchange Hedging
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Cotton Prices
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Cotton Cost
The cotton cost have come off substantial highs and
continue to fall during last two weeks of globalcommodity meltdown
In absence of purchase support the prices in domesticmarket are also weakening substantially
Even though cotton cost for the company would be
higher than the previous financial year average , but itwill be substantially lower than the original anticipation
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Energy Cost
Cost of power cost at Naroda is Rs. 5.27 per Kwh and at
Santej is Rs.8.35 per Kwh as against previous yearaverage of 4.10 and 4.80 respectively
Non availability of gas is significantly driving up the cost
of steam
Our efforts to obtain alternative gas is likely to yield
positive results and company is hopeful of situationresolving by end of current financial year
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Brand & Retail Environment
Retail environment was very sluggish during previous quarter andfirst two months of current quarter
Last two weeks have been substantially better and the market isdelivering like to like stores growth
Retailers distress
Large inventory pile up with retailers across the country
A string of closed and unprofitable stores across the retail segment
Post Diwali uncertainty
In light of global meltdown and domestic slowdown the post Diwali
scenario is uncertain
Real Estate After three years of rapid rise the commercial real estate is under
pressure and presenting interesting opportunities
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Arvind Brand & Retail Management
Response
Retail Sales
Management is tracking sales on daily basis and suitablyadjusting the short term strategies
A structured sourcing plan for ensuring minimum inventoryaccumulation already put up
Primary shipments to MBOs and retailers only on the basis offeedback of secondary sales
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Global Meltdown and Impact
The current global meltdown could impact fabric and garment salesto customers from US and Europe
Early signs of uncertainty is forcing buyers to postponecommitments
Most of the large customers of the company are going through arough patch
Response
Start aggressively pushing volume business at a price point to create
cushion for order fluctuations
Restart the commodity market and sharply priced orders
End expensive front end engagement in the overseas market Monitor the commercial position on daily basis and limit the global
outstanding exposure
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Outlook
The company would like to maintain a cautious outlook
due to difficult global conditions Even though the cost factors might improve substantiallymaintaining volumes could be a challenging task
The company is very confident of growing the ValueApparel retail business under the MegaMart umbrella.
in difficult times value retailers do much better business globallyand same is seen in the Indian markets too
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Thank You