Lakshmi Machine Q2 net nearly halves on falling sales

Lakshmi Machine Q2 net nearly halves on falling sales

Mumbai: Lakshmi Machine Works Ltd, India’s biggest textile machinery maker, on Thursday said its July-September net profit nearly halved on lower sales due to falling demand.

Lakshmi Machine reported a profit of Rs378.7 million, down from Rs745.92 million year-ago period, while sales fell to Rs4.4 billion from Rs5.82 billion.

“The textiles market worldwide is slowing down, its affecting us as well," said J Sridhar, senior general manager, finance at the firm

“Sales also dropped in the quarter as customers deferred orders due to repeated power cuts in southern states," he added speculating that the sales in October-December to worsen further.

Indian textile firms, the main customers of Lakshmi Machine are facing troubled times because of a power shortage in the southern Indian state, which has resulted in power cuts of about four hours a day.

“With such huge power cuts, people are deferring orders, despite a healthy order book," he said, adding he did not see deliveries picking up for another 3-6 months.

“In Tamil Nadu, we are seeing up to 40% power cuts on a daily basis," he added.

“The company, which commands 65% of India’s spinning machinery market, is seeing damping of demand in southern India, where the power crisis is most acute," said Sridhar.

“Markets in the north are better, but they are also slowing down now," he said, referring to a general slowing of demand in the Indian economy.

“In today’s conditions, the market is not going to improve and we are not going to see any drastic improvements in the next 6 months," he said.

India’s total textile exports for the fiscal year ended March 2008, stood at $22 billion, below an official target of $25.06 billion as a general slowdown in textiles and clothing products in major markets like the US and Europe hurt exports.

“However, Lakshmi Machine will be able to maintain its gross profit margin as input costs, especially of steel, had softened marginally," Sridhar said.

“Depreciation charges for the quarter, which also weighed on profitability, went up to Rs332.9 million from Rs264.6 million a year ago due to machines and capacities added last year," Sridhar said.

Lakshmi Machine Works shares ended down 10.19% at Rs527.55 on Wednesday.