(i) Sugar packed for export purpose but which could not be exported will be exempted from the operation of the Order on the basis of an assessment by the Department of Food and Public Distribution.

(ii) The following will be out of the purview of the above reservation:

* Sugar fortified with vitamins

* Packaging for export of commodities

* Small consumer packs of 25 kgs and below

* Bulk packaging of more than 100 kgs

Indian jute mill sector enjoys the above protection. But they are indicating that Jute Mills in Bangladesh enjoy competitive advantage due to relatively lower wages; lower power cost and substantial Government assistance. The industry seeks additional marketing assistance for Indian Jute goods, particularly jute yarn, for it to be competitive in international markets.

The jute products continue to witness competition from cheaper synthetic products. Further, the vagaries of weather affects production of raw jute, which may drive up the price of finished jute. Bangladesh has relatively low cost, and unabated imports of all jute goods from Bangladesh to India have a dampening effect on prices of Indian jute goods and consequently affect margins of the domestic jute sector. Further, crisis in West Asian countries has resulted in serious reduction in Jute Yarn exports due to a contraction of the Carpet Industry in those countries.

Cheviot Company indicated that the domestic demand of jute goods was generally good. But jute yarn exports declined and prices became un-remunerative. The industry is utilizing the benefits under Jute Technology Mission to modernization and to develop infrastructure. This will facilitate the Industry to improve its cost effectiveness, and the quality products. In the process, the competitiveness of the domestic jute industry, both in India, and abroad, can improve.

Gloster shines

Gloster recorded 108% spike in net profit to Rs 5.27 crore on 13% increase in net sales to Rs 78.88 crore, and 154% surge in other operating income to Rs 1.83 crore in the quarter ended June 2012. During this period, the company also benefited from 51% fall in interest costs to Rs 0.94 crore. The growth in net profit would have been higher but for 460% spike in provision for tax to Rs 2.63 crore during this period.

Gloster indicated that the initial forecasts of raw jute crop in the current jute season in good and there would also be enough carry over stock. As a result, the company expects raw jute prices to remain stable with an upward bias. The upward revision of minimum support price by 30% to Rs 2250 per quintal for TD5 South Bengal Jute is one of the reasons for expected firmness in Jute prices, despite good stock and production estimates. So, Glostar has taken steps to build and maintain adequate raw jute stock at appropriate time during the season.

Gloster has completed the 3rd phase of modernization has initiated 4th phase of modernization in FY 2011-12. In the fourth phase, old looms and spinning frames are being replaced with new / modern machines, with specific thrust on installing latest material handling equipments. The Company has made further progress in the promotional shopping/utility bags and jute made ups segment during the year. The company hopes to improve its operational and financial performance. The company has been stepping up dividend from 35% for seven years each through FY 2004-05 to 40% for two years each through FY 2006-07, which was further hiked to 50% each in two years through FY 2008-09. From thereon, the dividend was stepped up to 60% in FY 2009-10, 70% in FY 2010-11 and to 200% in FY 2011-12.

Ludlow Jute and specialities restores growth

Aekta Limited has since been renamed as Ludlow Jute and Specialities (LJS). The company reported 10% fall in sales to Rs 277.34 crore, 48% fall in other income to Rs 3.61 crore and 34% rise in provision for depreciation to Rs 3.61 in FY 2011-12. This coupled with fall in margins lead to drastic 66% fall in net profit to Rs 4.90 crore during this period.

In this background, the company reported 453% spike in net profit to Rs 1.05 crore on 10% increase in sales to Rs 64.86 crore in the quarter ended June 2012. The growth in profits would have been steeper, but for 16% fall in interest costs to Rs 0.43 crore and 733% spike in provision for tax to Rs 0.75 crore during this period.

LJS expects Raw Jute crop for the current year to be higher than last year subject to weather conditions being favourable. So, the company expects raw jute prices to remain at reasonable levels unlike remaining exorbitantly high in the previous year. But the company indicated that export market particularly for Jute Yarn is likely to remain suppressed on account of political uncertainty in West Asia. On the positive side, new developments in the form of lighter bags as well as hydro carbon free jute products will offer opportunities to expand the applications for jute

Products. But this would require continued research and development.

Cheviot Company's flexibility contains the damage

Cheviot Company indicated that there was slump in jute yarn exports in FY 2010-11 and FY 2011-12. The company contained the damage by leveraging on its adequate in-house infrastructure and full flexibility to cater to both domestic and overseas markets. Accordingly, in FY 2011-12, the company shifted its focus from manufacturing jute yarn to traditional jute products like sacking. Due to this flexibility in operational facilities, the company contained the damage to its sales, by stepping up domestic sales, amidst decline in exports and increase in costs of other inputs.

On the flipside, Cheviot Company's Export Oriented Unit at Falta Special Economic Zone continues to operate at low capacity utilization due to lack of orders for industrial fabrics amidst recession in Europe. In this background, in FY 2011-12, the Company created the required infrastructure at this unit to venture into export of jute shopping bags. This can improve the capacity utilization of this unit in due course.

Cheviot company reported 2% improvement in sales to Rs 66.98 crore, 23% increase in other operating income to Rs 1.12 crore and 68% spike in other income to Rs 2.35 crore in the quarter ended June 2012. This coupled with better margins facilitated the company to report 40% rise in net profit to Rs 9.85 crore in the quarter ended June 2012.

AI Champdany Industries profits trebled (213% rise) to Rs 0.94 crore on 16% fall in net sales to Rs 82.91 crore in the quarter ended June 2012. The company's yarn unit and Libra carpet unit at Choudwar, Cuttack in Orissa continues to remain suspended. Its flax unit is under suspension of work from 2^nd January 2012 due to labour issues. The company indicated that negotiation with workers is at an advanced stage, and this unit is likely to reopen shortly.

Rajvir Industries focuses on blended yarn

Rajvir Industries has indicated that the company can blend spun silk, wool, linen, cashmere with combed cotton, organic cotton, and supima cotton and give it in raw white route. The company can also blend spun silk, wool, linen, cashmere with viscose, modal, polyester in the synthetic route and give it both as raw white and melange. It can use spun silk, wool, linen, cashmere and give it in the cotton blends in the melange / heather routes.

Rajvir Industries has already commercially manufactured good volumes of cotton/silk, modal/silk and micro modal silk and sold it to various customers in India and World over. It has done bulk production of cotton / wool / melange, viscose / wool / melange, viscose / wool / raw white for several customers and now are ready with the entire range of fabrics and hangers.

Rajvir Industries recorded 524% spike in net profit to Rs 2.06 crore on 12% increase in net sales to Rs 73.42 crore in the quarter ended June 2012.

Raw jute prices moves up faster

We find that the jute textile sector rejoiced fall in jute prices, which enabled it to report better growth in profits in the quarter ended June 2012. During this period, the jute yarn prices improved sequentially but remained lower on y-o-y basis. The players benefited from sequential rise in prices, and utilized low cost raw jute inventories built up earlier. With weakening of demand for carpets in the global markets, and the rise in raw jute prices, the jute textile sector appears to be heading for fall in profits, especially those without adequate raw jute stock of low costs.

Outlook

In July 2012, raw jute as well as jute yarn prices has improved sequentially. But on y-o-y basis, while jute yarn prices fell 8%, the raw jute prices were higher by 11%. If this trend continues, we can visualize pressure on margins of jute yarn producers. However, players with adequate raw jute stock would rejoice, as on the one hand, they need not pay for increase in raw jute prices, and on the other can rejoice rise in jute yarn prices. So, the results for the quarter ending September 2012, will critically depend on the cost, and adequate availability of raw jute stock of the players, and their product and geographical mix of their revenues.

The Government of India's proposal to resume Export Promotion Assistance Scheme (EMA) renamed as "Scheme to incentives Social and Environment Compliance in the Jute Sector- For promotion of Exports' was welcomed by the Industry. However, this scheme is yet to be implemented. The industry urges the government to expedite resumption of EMA scheme in some form or other to promote exports. If this is restored, then there will be improvement in margins of the jute textile sector in general, and players with higher / rising share of exports in particular.