Arvind has posted earnings which are below expectations though not a huge disappointment. A big positive is that the textile revenue growth was above estimates.
In an interview with CNBC-TV18, Kulin Lalbhai, ED of Arvind spoke about the results and his outlook for the company.
Below is the verbatim transcript of the interview.
Sonia: The higher cotton prices have impacted the margins this time around. How do you plan to tackle these raw material prices? How many months of inventory do you have at the moment and at what price and will you now be changing your strategy and going slow on buying cotton?
A: No, in fact the peak in cotton prices in the previous quarter was quite unexpected. It was a very sharp rise that happened, but the good news is that the prices have already started softening and as far as the macros are concerned, the medium-term outlook for cotton should be bearish, there is a large cultivation that is due in both the US and in India and the beginning of softening of prices has already begun.
As far as Arvind is concerned we are sitting on very small working capital as far as cotton is concerned. So as the prices correct, we believe that the margins on the textile front should come back to the original EBITDA level very soon.
Anuj: When do we expect these margins to come back and what would be reasonable trajectory because this time that was the big disappointment - 9.4 percent versus 11.5 percent.
A: As I mentioned with the softening of prices which have already started, we should see the EBITDA in the textile business move back towards their original levels reasonably soon. So you should expect that the drop in Q4 EBITDA was more of a one-time readjustment that we needed to do.For entire interview, watch accompanying video.