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Hike in input costs hit Q2 net profits at LMW
Nov '11
Despite, a 31 percent rise in sales and buoyed by a good off-take of textile machinery from the Northern parts of India, major textile machinery producer Lakshmi Machine Works (LMW) posted a marginal increase in fiscal 2011-12 second quarter net profits.

Despite the various challenges that the Indian textile sector is facing, income from operations at LMW rose by a massive 31 percent to Rs 5.61 billion from Rs 4.29 billion, year-on-year. However, net profits augmented by just 7.4 percent to Rs 492.4 million in the second quarter from Rs 458.5 million from a year ago.

Speaking exclusively to fibre2fashion, Mr R Rajendran, Director (Finance) LMW said, “Actually in the second quarter we could utilize our capacities according to what we had planned mainly on account of current execution of our product order. The product order that we had received during the year 2010-11 are all under execution.

“So that has helped us at least to utilize our capacities to the maximum extent. And of course, in the process we were able to increase the volume of sales compared to the previous quarter. Also compared to the first half of 2010-11, there is a growth of around 39 percent in the half year of current fiscal 2011-12.

“Our net sales have increased from Rs 7.53 billion to Rs 10.54 billion in the first half of 2011-12. But at the same time, gross and net profits have fallen on account of rise in input costs. The gross profit ratio has come down to 21 percent to 17 percent. Correspondingly net profit ratio has dropped from 15 percent to 12 percent during this period.

Informing about their major Indian markets, he said, “We have clients throughout India but mainly Andhra Pradesh and the North East regions are now our major buyers, since no new projects are coming up in Tamil Nadu. Mainly new projects including expansions are coming up in the northern parts of India and parts of Andhra Pradesh”.

“Out of total of about 42-43 million spindles installed in India, nearly 23 million spindles have been supplied by LMW. Which means we are the preferred choice of textile mills, due to which our order book position has also actually increased, compared to the previous year”.

Speaking about LMW's performance in the rest of the fiscal year, he informed, “As I mentioned earlier, we have orders on hand, which will stretch for the full current fiscal year as well as the next fiscal year. We expect to repeat our performance of the first half of current fiscal in the second half”.

Revealing their order book position he said, “At this juncture we are sitting on a very good order book, which stands at Rs 46 billion. The only challenge we are facing is that despite matured orders, textile mills are not taking deliveries. They are waiting for a good opportune moment to expand or create further capacities”.

Fibre2fashion News Desk - India

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