Kitchen appliance maker TTK Prestige reported a 12% fall in net profit to Rs 30 crore in the second quarter of FY13 from Rs 34 crore in the corresponding quarter last fiscal. The company’s net sales rose by 10.5% to Rs 335.5 crore from Rs 303.5 crore during the same period.
TT Jagannathan, Chairman, TTK Prestige attributed the fall in profit to a depreciating rupee and the high cost of aluminium. Scarcity of electricity in its manufacturing plant at Tamil Nadu along with high cost of power contributed to the losses, he added. Going forward, the company is looking at a revenue growth of 25% in the current fiscal year.
Here is the edited transcript of the interview on CNBC-TV18.
Q: It is a good show as far as the top line is concerned with a 10 percent or 11 percent uptick. But why was there so much pressure on the bottom-line?
A: There were actually two reasons. One was the rupee, it went up to Rs 56 and it seriously impacted our import. The cost of our raw material aluminum is based on the dollar price and that again impacted the bottom line.
Q: The rupee has appreciated on the cost front and you might have some relief. But what about demand itself? We have had sales growth of a tepid 10 percent. Do you see that reversing as well?
A: In the last quarter, several things happened. One was a steep increase in electricity prices. Two, in Tamil Nadu there was almost no availability of electricity with 14 hours of power cut. So all these affected the appliance sale and also the fact that Diwali this year is in November as compared to October last year, has impacted this quarter's sales. So an apple to apple comparison is a bit difficult. We now see that the market has picked up fairly dramatically, retail is very brittle now.
Q: So then would it be a combination of positives in the third quarter? You will obviously have the festival sales getting counted in, the rupee is a little more amenable if you are an importer. As well is electricity better off, are you better off in terms of power availability?
A: No power availability is not better. However, the cap on 6 gas cylinders will improve our induction cooker sales. We are better off on three fronts, the festival season, the rupee and the gas cap.
Q: So how would you see your revenues growing?
A: We will stay with the same 25 percent growth for the year.
Q: There was a report from an analyst, from a foreign brokerage which has quoted the TTK management saying they agree with the thesis stating that the persistent inflation combined with slowing wage growth is leading to a risk to the structural growth story itself. Would you say that this is not quoting you correctly? You seem to sound optimistic at this point, that there is a recovery in the coming quarter?
A: Nobody has met the analyst. However, I did say that growth is slowing down and that is definitely impacting our growth, there is no question about that.
Q: Would 25 be a tall ask or you should be able to manage that?
A: We believe we should be able to manage that.
Q: Would you therefore put your expansions on the back burner in some fashion?
A: No that is not possible, nearly everything is committed so you can't withdraw half way through.
Q: How about the export markets?
A: That is doing extremely well for us because of our microwave pressure cookers. It has been accepted across the world and our exports will more than double this year.
Q: What is the percentage of your revenues that come from exports?
A: Unfortunately, 3 to 6 percent.
Q: So you are pumping up that part. Should we expect it to form a higher percentage before the year is out or in FY14?
A: Last year it was 3 percent, it will go up to 6 percent.