Key Takeaways of the call

• Raymond reported a consolidated Net Loss of Rs 34.98 crore during Q1FY13 against Net Profit of Rs 10.76 crore in the corresponding quarter last year, despite the 10% rise in the Net Sales to Rs 837.71 crore. The fall in the profits was mainly due to fall in profits in the standalone textile segment and branded apparel segment. Also, the company incurred VRS expenditure of Rs 12.92 crore in the quarter ended June 2012, as against nil in the corresponding previous quarter. These factors together led to negative turnaround of the company in the quarter ended June 2012.

• Textile division reported 6% growth in Net Sales to Rs 366 crore on the back of both higher volumes and better realizations in the export market. Exports reported 21% growth in value and 58% growth in volumes. However, the EBIDTA was impacted due to the challenging domestic environment, increase in B2B sales and input cost increases (particularly wool), which shrunk the margins by whopping 1000 bps to 5%. EBIDTA declined by 65% to Rs 18 crore.

• Branded Apparel which includes Raymond Apparel and Colorplus reported 3% dip in the Net Sales to Rs 171 crore impacted by the poor consumer sentiment and early end of season sale. Further, the focus on liquidating old inventory also impacted the margins. Margins contracted by 700 bps to 6%. EBITDA declined by 57% to Rs 10 crore. Park Avenue was recognized as one of the Power Brands of 2012.

• Garmenting business that includes Silver Spark and Celebrations reported strong 42% growth in the Net Sales to Rs 46 crore. Favorable currency rates helped the margins to double from 3% to 6%. The company has a healthy order book in the garmenting business.

• Cotton shirting business reported 29% growth in the Net Sales to Rs 68 crore led by the domestic volume growth. Exports contributed Rs 14 crore to the total sales. Margins witnessed a jump of 400 bps to 14% mainly due to correction in cotton prices. EBITDA was higher by 82% to Rs 10 crore. Capacity utilizations improved on expanded capacity.

• Indian operations of Denim reported 3% increase in the Net Sales to Rs 198 crore backed by strong exports which contributed a majority of Rs 104 crore. EBIDTA margins improved 200 bps to 13% due to the correction in the cotton prices and export mix. Production capacity utilized fully and is fully booked for next 3 months. Romanian operations did well during the quarter.

• The company added 28 stores with 34045 sq ft of retail store and closed 14 stores during the quarter taking the total number of stores to 867 at the end of Q1FY13 from 750 in the corresponding previous quarter. The retail space grew by 11% to 1681 thousand sq ft during the June quarter ended 2012. Like to like sales declined by 3%.

• Tools and Hardware business grew by 30% to Rs 91 crore led by files. EBIDTA jumped 50% to Rs 12 crore. New products are gaining traction.

• Backed by significant growth in exports, Auto component sales grew by 20% to Rs 39 crore. EBIDTA grew by 33% to Rs 7 crore, while the margins expanded 200 bps to 17%. The new acquisition of the company-Trinity has witnessed turnaround during the quarter.

• Thane plant came into production but was not utilized fully due to poor demand.

• The company expects that the upcoming festival and wedding season particularly after November 2012 will help in improving the margins. The company expects the business to do better than last year as it does not foresee any sudden hike in the input cost going forward.

• The management is hopeful that the global uncertainnities and the domestic scenario will improve going forward. The company is confident that this will bolster the market sentiment and help the industry steer back on a growth path in the second half of the financial year 2012-13.