Kitex Garments
This Kerala based company is the world’s third largest supplier of infant wear, with clients like Gerber, The Children’s Place and Wal-Mart. Kitex’s 9,000-strong workforce churns out close to 200 million garments annually at roughly 50 cents apiece.
The stock price tumbled big time today as its performance for Q2FY17 was quite a disappointment. The company posted a 52% (YoY) drop in net profit for the quarter at Rs.13 crore and this was on a 21% fall in net sales at Rs.95 crore. This poor show despite the dollar ruling strong against the rupee was worrisome, especially because most of the company’s products are exported.
Costs were down 16% but that did not help the EBITDA, which suffered on account of the lower topline at Rs.32 crore, down 29% while margins slipped from 33% to 30%. The deduction of Rs.3 crore as other income which in other quarters was an addition of around Rs.7 crore further dented the bottomline. The company has made no mention of what this Rs.3 crore deduction was for. A 40% lower tax outgo helped shore the decline in net profit.
The good news here is that the company has reduced its debt from Rs.92 crore to Rs.10 crore (YoY) and this has brought down the interest costs down significantly. The company’s equity is very small at Rs.4.75 crore, reserves strong at Rs.363 crore and cash as at 30th Sept 2016 stood at Rs.206 crore.