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VIP Industries reduced the losses at PAT level by 22% to Rs 1.69 crore in the quarter ended December 2005. Marginal 10 basis points improvement in margins, 33% savings in interest costs and 21% fall in provision for depreciation enabled the company to contain the losses. The results would have been better but for 63% fall in other income during this period.
The company reported 4% fall in net sales to Rs 72.05 crore in the quarter ended December 2005. Even impressive 31.8% rise in Exports, boosted by the Carlton brand, during this period, could not arrest the fall in sales.
On impressive growth in exports, Dilip G Piramal, Chairman, VIP Industries remarked "With Carlton for exports, new product launches and fresh approach to branding, VIP is poised for better times ahead. We will shortly introduce the world-class Carlton range of products in the domestic markets. Carlton exports have already touched Rs 30 crore in the short period after its launch. We expect this figure to increase substantially by the year end"
VIP Industries is a leading luggage manufacturer in Asia. It has four factories, which produce nearly five million pieces a year, making it the second largest producer of luggage in the world. It sells luggage under three brand names viz. VIP, Delsey and Carlton. The company has presents in Middle East, UK, USA, Germany, Spain, Italy and select African and South East Asian countries.
Performance for the quarter ended December ’05
The softening PP prices and the company’s cost control strategy together facilitated a 10 basis points improvement in margins to 2.4% in the quarter ended December 2005 from 2.3% in the corresponding previous quarter.
250 basis points savings in raw material consumed to 34.2% propelled the improvement in margins. Similarly staff cost was down by 30 bps to 10.3% and other expenses by 10 bps to23.6%. However, the full benefit of these savings were not reflected in margins as the purchase of finished goods was high by 290 bps to 29.5%. As a result, the operating profit inched up by 1% to Rs 1.74 crore. However, steep 63% fall in other income to Rs 0.45 crore lead to 25% fall in PBIDT to Rs 2.19 crore.
The company succeeded in bringing down its interest costs by 33% to Rs 1.34 crore while provision for depreciation was also lower by 21% to Rs 2.47 crore. As a result, the company succeeded in bringing down the loss at PBT level by 26% to Rs 1.62 crore in the quarter ended December 2005. The EO expenditure increased by 12% to Rs 1.44 crore, thereby restricting the fall in losses to 12% at Rs 3.06 crore. The company claimed a credit of Rs 0.35 crore towards tax (including deferred tax and Fringe benefit tax), which was 61% lower than the corresponding previous quarter. In the end, the company reported loss of Rs 1.69 crore at PAT level, which was 22% lower than the corresponding previous quarter.
Performance for the nine months ended December ’05
Net sales for nine months ended December’05 increased by 4% to Rs 231.63 crore. With 20 basis points improvement in margins to 8.2%, the operating profit increased by 6% to Rs 18.93 crore during this period. Other income was up by 11% to Rs 4.49 crore, leading to 7% increase in PBIDT to Rs 23.42 crore.
The Interest outgo reduced by 22% to Rs 4.33 crore while provision for depreciation was up by 7% to Rs 8.58 crore. As a result, the PBT before EO increased by 26% to Rs 10.51 crore.
The extraordinary expenses (which includes VRS) increased by 27% to Rs 4.20 crore, leading to 25% rise in PBT after EO to Rs 6.31 crore. Provision for tax (including deferred tax and fringe benefit tax) rose by 43% to Rs 4.07 crore. Despite the surge in taxation, the profits at the net level showed a rise of 48% to Rs 4.36 crore.
Segment Results:
The company operates with two segments namely-Luggage segment and Furniture segment. The results of these segments are as under,
- Luggage: For the quarter ended December’05 the luggage business posted dip in revenue by 3% to Rs 65.67 crore. PBIT for the segment was at Rs 1.71 crore compared to loss of Rs 0.52 crore in the corresponding previous quarter. For the nine months period, the sales was up by 7% to Rs 213.39 crore and PBIT was up by 13% to Rs 12.96 crore. This segment contributes 91% of the total sales revenue for the company and 97% of the total PBIT.
- Furniture: For the quarter ended December’05 the furniture segment reported a fall in revenue of 17% to Rs. 6.72 crore. This segment turned around and reported profit of Rs 0.22 crore at PBIT level in the quarter ended December 2005 as against loss of Rs 0.23 crore in the corresponding previous quarter. For the nine months period, the sales was down by 19% to Rs 20.40 crore and PBIT was at Rs 0.44 crore compared to 0.19 crore in the corresponding previous period. This segment contributes 9% of the total sales for the company and 3% of the total PBIT.
Other developments:
V.I.P introduced several new products in the premium, popular and economy range in the last quarter. It is now continuously striving to keep abreast of changing market trends and cater to the demands of travelers worldwide. Instead of pursuing sales in all segments, VIP has made a marked change in its strategy by focusing on sales of more profitable products. This will show results in the coming quarter.
In an expansion overdrive to consolidate its position in the domestic market, VIP Industries is setting up a new plant in Uttaranchal. This plant is scheduled for commercial production shortly. This should lead to income tax and excise duty benefits to the company.
VIP shares are currently trading at Rs 128/-
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