Ludlow Jute

This Kolkatta based jute making company has been in the limelight for the past couple of days. For the past 2-3 days, it has new hitting new 52-week highs and breaching the upper circuit. The Govt seems to be taking a lot of measures to reinvent and breathe life into the jute industry. First was the scrapping of import licenses which will help domestic industry and then the Jute Advisory Board (JAB) said that it expects raw jute prices to soar on the back of higher estimates of domestic consumption of the fibre crop.  JAB expects domestic consumption of raw jute at 0.2 million bales, 100% higher than the previous financial year.

Over and above all this, the Govt approved mandatory use of jute packaging material for foodgrains and sugar. It has said that at least 90% of foodgrain output and 20% of sugar production will be reserved for packaging in jute, for a period of July 1, 2015 to June 30, 2016. This is expected to boost demand and that’s precisely why jute stocks are in the reckoning.

Ludlow happens to be the only jute mill in India built by the Americans. The mill was purchased by S.S Kanoria group from the Americans in 1977. They now hold 67.20% equity of the company. Its production capacity stands at 60,000 mtpa. It is stated to be one of the most modern and mechanized jute mills of India.

Financially, we can see the phenomenal rise in its raw material costs – raw jute prices. The most commonly used raw jute - TD5 grade jute has seen its price soar 23% over MSP on an average between 2011-12 and 2014-15 but it has reached 57% in Sept’15. Ludlow’s raw material costs rose by a jaw dropping 92% but thanks to the 91% jump in net sales at Rs.103 crore, it could end the quarter with a turnaround – net profit at Rs.3 crore v/s loss of Rs.1 crore (YoY) and Rs.48 lakh net profit in Q1. Its equity stands at Rs.10.80 and debt is at Rs.31 crore.