A brighter domestic economic outlook benefited consumer durable companies in fiscal 2010, a trend that became pronounced during the last quarter.
Titan Industries Ltd, a marketeer of jewellery, watches and other accessories, reported a 48% growth in net sales in the March quarter. It not only bettered consensus estimates, but also its December quarter growth of 29%.
Higher jewellery sales was the key reason, rising by 63% to Rs991 crore, while sales of watches rose by a more sedate 17.4% to Rs281.8 crore.
Higher gold prices had affected gold demand in the first half of fiscal 2010. Volume growth declined by 10% and 15% in the first and second quarters and then recovered with a 5% growth in the third quarter, due to a combination of improving economic prospects and some stability in gold prices. The fourth quarter saw this trend strengthen, as gold prices actually declined, ending the quarter 3% lower compared with the December quarter. Volume growth improved as a result and gold prices were still 12% higher compared with the year-ago period, boosting sales growth. Profitability improved, too, with its segment profit rising to Rs71.6 crore from Rs10.6 crore in the year-ago period.
Graphic: Ahmed Raza Khan/Mint
The good showing in its jewellery division made up for a relatively subdued performance by its watches division. Segment profit fell by 52.7% to Rs21.7 crore. Lower profitability may have been due to advertising costs, which were up by 48% at the company level, or higher input costs. Overall material costs rose by 61%, but the company cut other expenditure by 27% during the quarter. That helped operating profit margins to rise from 6.3% in the year-ago period to 7.1%. The company’s March quarter net profit nearly doubled to Rs51 crore. For the full year, sales rose by 23% while its profit rose by 58%.
During fiscal 2010, Titan’s retail network expanded by about 11% to 539 stores and its retail space grew by about 13%. Low levels of market penetration characterize both the branded watches and jewellery segment, offering longer-term potential to grow. That requires expanding reach and a product portfolio catering to different income segments, requiring investments. Its new business of eyewear is being scaled up. The company has exceeded its overall revenue target of Rs4,562 crore of sales for fiscal 2010. Its current year target of Rs5,776 crore requires sales to grow by at least 20%. Expectations of a good fiscal are already built into the price of its share, which are trading at 37 times fiscal 2010 earnings per share.
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