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Indian mills profit margins rise in Q2

Profit margins of Indian textile mills improved during the second quarter. Input costs were low, driven largely by a fall in cotton prices. Welspun India’s net profit for example grew 21.4 per cent. Sales grew 11 per cent. Raymond’s sales increased 16 per cent, ebitda by 36 per cent and net profit by 63 per cent. Better capacity utilisation in garmenting, higher gains from currency depreciation and continued focus on efficiencies may drive Raymond’s margin expansion in the second half.

Raw material prices remained subdued during the quarter, though cotton demand from domestic textile manufacturers was robust, as mills needed to prepare stocks for the festival and seasonal demand in October-November. These dynamics might change in the coming quarters with demand for cotton coming from Pakistan, China and other importing countries at a time when output of the natural fiber is estimated to decline. As against the earlier forecast of 36 million bales of output, the new estimate is about 33 million bales this year.

Cotton prices in major producing centers such as Punjab and Madhya Pradesh have declined to nearly 10 per cent below the minimum support price. China has since turned to India for import of cotton due to a higher import duty levied on its traditional supplier, America. Pakistan is also likely to procure from India this year.

 
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