In an interview with CNBC-TV18, Jacob, CMD of Kitex Garments said revenue will improve in coming quarters as the order book is full
The first quarter is usually sluggish for textile industry and the numbers improve as the year progresses, Sabu Jacob, CMD of Kitex Garments told CNBC-TV18.
Also weighing down the bottomline was higher interest cost due to reversal in government subsidy, he said.
The company’s revenue grew 6 percent to Rs 109 crore and operating profit margin expanded 90 basis points to 27.6 percent.
The numbers disappointed the market, given the scorching rise in the share price over the last four months.
Kitex shares more than doubled to over Rs 1000 between March and July and are now under pressure after the weak first quarter earnings.
Jacob is sticking to the full year revenue guidance of Rs 600-650 crore, adding that the order book is already full for this year. Capital expenditure (capex) target for the current year is Rs 10-15 crore, he said.
Jacob said the company plans to double its capacity in next three years.
Below is the transcript of Sabu Jacob's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: This has come as a bit of a disappointment - the 6 percent topline growth and the market has expressed its displeasure in your stock price, but would this be the growth in coming quarters as well or will you be able to better the topline growth?
A: First quarter for textile field is always slow. We expected only Rs 110 crore, but achieved Rs 115 crore for Q1. According to us, it is a much better result. If you see the profit before tax (PBT), if you come back to Q1, we made a 2.45 percent increase.
Sonia: For FY16, you had said that you would do about Rs 600-650 crore of revenues. Do you stick to that guidance?
A: Yes, we will reach.
Latha: What went wrong? Is it only this quarterly slowness or do you want to take us through your quarter gone by and tell us if there were any one-off negative events?
A: Quarter one is always slow and you will find Q2 better, Q3 is further better and in Q4, we will make maximum result.
Latha: What are your major exports markets where you see the demand continuing?
A: We are fully booked for FY16.
Sonia: Rs 600 crore to Rs 650 crore is your expectation for revenues, but what about on the margin front because this time around you maintained your margins around 27.6 percent. Going ahead, by the end of FY16, where do you see your margins?
A: The margin in last Q1 and this Q1, now we made increase of 2 percent. Definitely, this trend will continue and we will make much better margin on that.
Latha: Are you looking at any other expansions since you say you are fully booked FY16, you have more demand than your capacity allows, should we expect any capex plans?
A: This year we plan for 15-20 percent increase on revenue and within three years, our plan is to double the capacity, i.e. 100 percent growth. So, that means slowly we are also adding the production and that is already planned and orders are taken for that.
Sonia: What exactly is the capex planned?
A: It's not a big amount - its only Rs 10-15 crore this year. We have already invested in huge on the processing side in the last couple of years. So, the investment is very marginal, but the revenue is going to be much more.
Sonia: One thing that is hitting your profitability is the higher interest expenses. Even in this quarter, your interest cost has gone up to almost Rs 5 crore versus Rs 3.5 crore earlier. Can you tell us by the end of the year, how much will your debt go down to and how much will your interests cost drop?
A: We have surplus. Last year there was a subsidy on interest and the government has reversed that and that's why the increase of Rs 5 crore on the interest rate, in spite of that interest increase we made 2-2.4 percent increase on the PBT.
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First Published on Jul 21, 2015 10:53 am