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Vardhman Textile hosted
a conference call on November 04, 2024. In the conference call the company was
represented by Mr Neeraj Jain –Joint managing Director, Ms Sagarika Jain
–Executive Director, Mr Rajeev Thapar-CFO, Mr Sushil Jhamb-Director raw
material and Mr Mukesh Bansal-Head-Fabric Marketing.
Key takeaways of the call
Revenues:
Q2 was challenging quarter for the company
and the industry.
Revenues for the quarter stood at Rs 2454.78
crore a growth of 5.2% YoY.
Volume data:
Yarn
The
company produced 67150 Metric ton in Q2FY2025 v/s 66472 metric ton in Q2FY2024
and the company sold 68461 Metric ton in Q2FY2025 v/s 69221 metric ton in
Q2FY2024.
Grey fabric
The
company produced 515 lac meters in Q2FY2025 v/s 526 lac meters in Q2FY2024 and
the company sold 515 lac meters in Q2FY2025 v/s 517 lac meters in Q2FY2024.
Processed fabric:
The
company produced 413 lac meters in Q2FY2025 v/s 383 lac meters in Q2FY2024 and
the company sold 419 lac meters in Q2FY2025 v/s 374 lac meters in Q2FY2024
Cotton prices:
International
cotton prices are around 71-72 US cents while futures are trading at 1200 bps
higher. In addition to that the imported cotton has 11% duty.
Domestic
cotton prices are around 84-85 US cents.
Cotton yarn spread: In Q1 cotton yarn spread was around 75-80 US cents per ton which has
reduced to 60 US cents currently.
EBITDA: Blended EBITDA margin for the company is around 13-14% and is better
for fabric business.
EBITDA
was around 20% ten years back which has reduced to 13-14%. The company expects
13-14% EBITDA margins as new normal. This is likely to remain unless the
government makes some fundamental change like reducing import duty on cotton
imports.
Bangladesh: There was some disruption for some brief period due to conflict in
Bangladesh. However, company volume was not impacted due to the disruption.
Cotton Arrivals: Cotton arrivals which started around November 1, 2024 is currently
around 60000-80000 bales per day which is expected to go up to 100000 bales per
day. The company expects total arrival of around 30 million bales during the
new season.
CAPEX: The company has announced a CAPEX of Rs 2500 crore for FY2025 and
FY2026. The company expects the expansion to be completed in Q1FY2026.
The
company is expanding capacity by 20% in Yarn and fabric business.
Garmenting: The company is operating a
small capacity of garmenting profitable.
The reason for company
not planning to add significant capacity in garmenting is due to the
regulations with respect to permanent labour and the cost of labour which is
costly when compared to Countries like Bangladesh.
Technical textile: The company’s
CAPEX for technical textile is
progressing as planned. The company expects it to complete in phases.
Once the 1st
phase is completed the company will have 15 lac meters capacity for technical
textile.
The PBT/Sales margin is
expected around 25-30% for technical textiles.
Used garments:
Western
world is looking at technical textiles as a measure of sustainability. The
company expects regulations for the same to be in place at the earliest.
The
company has a capacity to process used garments to the tune of 6 tons per day
and plans to add another 6 tons per day capacity.
Margins are
better in Used garments processing business.
Green Energy:
Green
energy contribution is around 4-5% currently and the company plans to add in a
accelerated manner to reach green energy capacity to 25% of the total requirements
in next 2-3 years.
The
company expects return of 15-20% on capital employed.
Cash and Debt: Cash balance as on September 30, 2024 is Rs 2300 crore and Debt stood
at Rs 1000 crore.
Outlook: Overall demand outlook is good and is improving day by day and
month on month.
Demand
for yarn from home textile industry is good and most of the home textie companies
are operating at 100% capacity utilization.
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