Profitability has accelerated sharply with sustained growth, including on a sequential basis, despite the back-breaking challenge posed by the sudden and sharp appreciation of the Rupee for the company's international business.
Financial discipline consistent strategy of global sourcing and derisking of the business continues to stand the company in good stead. The company has used a permutation of tools to achieve these results, which are far better than that of the industry.
Analysis: H1 ended 30.09.2007 Vs H1 ended 30.09.2006:
• SALES : Standalone Up 21%; Consolidated Up16%
• EBITDA : Standalone Up 70%; Consolidated Up 76%
• EBITDA Margin : Standalone 15.11% vs. 10.72%, Consolidated 18.62% Vs 12.28%
• PBT : Standalone Up91%; Consolidated Up 91%
• PBT Margin : Standalone12.85% vs. 8.13%, Consolidated 15.37% Vs9.36%
• PAT : Standalone Up 80%; Consolidated Up 88%
• PAT Margin : Standalone 8.12% vs.5.43%, Consolidated 12.28% Vs6.98%
• EPS : Standalone Rs.10.30/- Vs Rs.5.71/-; Consolidated Rs.17.94/- Vs Rs 9.55/- (per share)(not annualised)
Outlook:
With the Government of India having announced an increase in the rate of duty drawback (partial reimbursement of taxes paid on inputs) from 7% to 10% of FOB value of Export, with a corresponding increase in the cap of the Rupee drawback per unit, the effect of the appreciation of the Rupee has been partially blunted.
The Government of India has announced the rationalisation of service tax on some services taxed on export activities (services are not taxed anywhere in our competitor countries) and is looking at further rationalisation of service tax on the remaining taxable services.
While the company lauds this as a step in the right direction, the cost disabilities in India have crippled a large segment of our industry, which the company has fortunately insulated itself from to a considerable extent.
The free trade negotiations with the EU, by both India as well as the GCC (including the UAE), holds exciting possibilities. The sudden, sharp and rapid appreciation of the Rupee is a reality to live with, the impact of which on the company has been blunted, but not extinguished, despite which the performance of the company speaks for itself.
The concerns referred to in the past, i.e, the service tax on some services in the export business and on store rentals besides high rentals per se for stores, continue to pose a challenge. With the commencement of consumer spending for the festive season, the future seems exciting as well as challenging.
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Zodiac Clothing Company Ltd
marketing@alchempro.com
