2007-08 - Aditya Birla Nuvo, Ltd

MANAGEMENT’S DISCUSSION AND ANALYSISAmidst all these challenges, the textiles business of your Company strengthened its leadership position inthe linen and wool segments. To meet the growing demand for Linen, weaving and spinning capacities ofLinen was expanded by 31 looms and 6,388 spindles respectively to reach a total capacity of 107 looms and15,340 spindles.The demand for Linen Fabric continued to remain buoyant. Strong growth has been seen in the retailsegment. To encash the opportunity, more exclusive showrooms were set up under the brand name of “LinenClub Fabrics”. In the wool segment, business focused on hank-dyed knit yarn, which is a better paying nichesegment.Your Company has disposed off Synthetic spinning during the year, in line with the strategy to exit from thisbusiness in a phased manner.The business posted revenues at Rs. 594.9 Crores, lower by 5% as compared to Rs. 625.0 Crores achieved inthe previous year. Excluding the synthetic yarn segment, which was completely exited in October 2007,revenues from continued operations grew by 10%, on a like-to-like basis. The operating profit was maintaineddespite weak US Dollar, down sizing of synthetic spinning segment and steep rise in wool prices. The businessalso realised Rs. 2.4 Crores from the sale of carbon credits during the year.Business OutlookChina is the major player in Global Textile Trade. Rising wages and inflation in China, repetitive hike in interestrates and faster appreciation of Yuan might bring competitiveness of Chinese Exporters at par with Indianplayers. Recent appreciation of US Dollar against Indian Rupee could bring some cheer to the Indian TextileIndustry. Global slowdown remains a cause of concern.Domestic demand is expected to remain robust, more so in view of higher disposable income. Demand forLifestyle products is increasing and Linen comes under that category. To enhance its presence in high payingretail segment, your Company is planning to open more exclusive showrooms for Linen Fabric, besidesincreasing network of multi-brand outlets. To improve the overall profitability of the business, your Companywill leverage the expanded capacity of linen yarn and fabrics besides increasing share of value added productsin worsted segment and improving OTIF in linen segment. The business will also focus on finer counts toinsulate from Chinese exports. Price of key input greasy wool is expected to remain stable as forecast showshigher production next year. Overall, the outlook for the Indian textile industry remains positive.FINANCIAL REVIEW AND ANALYSIS – STANDALONERs. Crores2007-08 2006-07 Change (%)Net Income from Operations 3,924.2 3,420.5 15%Other Income 41.6 44.5 –7%Operating Profit (PBDIT) 633.9 603.8 5%Net Interest 179.0 171.2 5%Depreciation 141.1 120.3 17%Profit before Tax and Exceptional Items 313.8 312.3 —Exceptional Gain/(Loss) 0.7 (1.2) —Profit before Tax 314.6 311.1 1%Provision for Taxation (net) 71.5 86.1 –17%Net Profit 243.1 225.0 8%(26)