Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Arvind Ltd (BOM:500101, Financial) reported a 14% growth in revenue for Q2 FY25, reaching INR 2,188 crores, marking the highest quarterly revenue in the past nine quarters.
- The company achieved a 20% increase in profit before tax, reaching INR 135 crores, despite challenges in the macro environment.
- Arvind Ltd's textile division showed strong performance with an EBITDA margin of 10.3%, supported by volume growth and a stable product mix.
- The advanced material division reported a revenue growth of nearly 10% and maintained a margin of 15.3%, with expectations of further growth in the coming quarters.
- The company is on track with its capital management plan, having spent 40% of its annual CapEx plan to augment garmenting and AMD capacity, indicating a focus on future growth.
Negative Points
- Higher logistics costs, particularly air freight, impacted the company's EBITDA, with a spillover cost of INR 11 crores.
- Fixed costs, including salaries, increased during the quarter, affecting overall profitability.
- Deferred tax adjustments eroded the profit after tax, with a one-time impact of INR 29 crores.
- The human protection segment within the advanced material division faced lower-than-expected demand from a major customer, impacting growth.
- The company anticipates being slightly short of its garment volume target for the year, indicating potential challenges in meeting demand expectations.
Q & A Highlights
Q: Can you elaborate on the performance and future outlook of the Advanced Material Division (AMD)?
A: Punit Lalbhai, Vice Chairman, Executive Director: We are confident about achieving 15%+ value growth in AMD. Despite some price erosion due to raw material price drops, volume growth was around 15%. Human protection demand was unexpectedly low from a major customer, but we have compensated for this in future quarters.
Q: With the new textile policy in Gujarat, will Arvind Ltd focus expansion within the state or consider other locations?
A: Punit Lalbhai, Vice Chairman, Executive Director: Gujarat's new policy is advantageous, and we plan some base investments here. However, we will also consider Madhya Pradesh and Orissa, especially for garmenting due to labor availability. For AMD, Gujarat looks attractive under the new policy.
Q: How did Arvind Ltd manage to achieve strong export volumes in denim and woven fabrics despite disruptions in Bangladesh?
A: Susheel Kaul, Managing Director & President - Textile Business: Brands supported the demand in Bangladesh, ensuring continuity. While there was a slight impact, it was not significant. Quarter three is typically low for denim, but woven volumes will compensate.
Q: What are the plans for capacity expansion in denim, given the high utilization rates?
A: Punit Lalbhai, Vice Chairman, Executive Director: We plan to expand denim through verticalization by adding more garment capacity rather than fabric capacity. This approach increases control over the supply chain and reduces dependency on fabric sales to Bangladesh.
Q: Can you provide clarity on the CapEx spending and its impact on capacity expansion?
A: Punit Lalbhai, Vice Chairman, Executive Director: CapEx is divided equally among AMD, garments, and other areas like fabric differentiation and automation. Capacity expansions, particularly in wovens, will start contributing from late Q4, with full benefits expected next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
