Ashima Witnessed a 2.2 Per Cent Decline in Its Net Sales

The year 2013-14 was difficult for fabric manufacturing industry as it faced problems on several fronts such as continued inflationary pressures, firming of yarn prices and persistent slowdown in global textile industry. The current economic slowdown, which has gripped textile sector, has its inevitable impact on the profitability of the businesses.

Ashima, one of India's leading 100% cotton fabric manufacturers, continued to find trading conditions difficult in the second quarter ended September 30, 2013, due to increase in yarn prices, enhanced costs due to wage revision, increase in salary cost and inflationary pressure led to higher costs and expenses.

The company reported a net loss of Rs 302.49 lakhs in the second quarter ended September 30, 2013 as compared to a net loss of Rs 370.28 lakhs. 

During the six month under review, the company witnessed a 2.2 per cent decline in its net sales which stood at Rs 6096.13 lakhs as compared to Rs 6222.08 lakhs in the same period a year ago. Volumes were affected on account of buying power of customers getting affected due to inflationary pressures.

Yarn prices strengthened due to global factors like higher imports by China and removal of safeguard import duty by Turkey during the year.

As the company has been facing financial constraints, it is unable to invest in machinery upgradation required for product development, as well as for keeping machinery and utilities in good operational condition. This has hampered product development and affected efficiency, resulting in sub-optimum performance.

The company has continued to operate only in one segment i.e. textiles. The different products within textile include denim, spinfab, and attires. The performance of Spinfab division remained under pressure in Q2 due to higher yarn prices, which offset the marked improvement in performance of denim division which spurted amid lower cotton prices.

The downturn into which the world’s largest economy has been in, is expected to continue for some more time and the heat of this slowdown will hurt the profitability of company. There are not many positive indications except for the marginal easing of inflation of late. A good monsoon, however, may salvage the situation to some extent, but a substantial improvement in the economy or markets in general or textile market in particular is unlikely to happen.