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Bata: 'labourious growth'

Oct 15, 1999

Bata India Limited has reported a 30% increase in net profit to Rs 36 m for the third quarter ending September 30, 1999, over the corresponding period in the previous year. Sales however, fell 4% to Rs 1,641 m during the same period. Bata India manufactures different types of footwear including rubber/canvas footwear, leather footwear and plastic footwear. Bata also markets apparel under the brand names of North Star, Power and Ambassador. It derives over 70% of its revenues from retail outlets while the balance comes from the wholesale segment.

Labour unrest has kept Bata's largest manufacturing facility in Faridabad, Haryana, under a lockout since the end of February 1999. This has adversely affected the turnover of the company. This facility with a capacity of 43 million pairs per annum makes rubber and canvas footwear, which is one of the high-margins businesses for Bata. In addition, it is yet to sign the wage agreement with the unions at its Batanagar factory in Calcutta.

Net profit for the nine months from January to September 30, 1999, was however, down 21% to Rs 210 m, owing to a three-fold increase in tax provision to Rs 128 m. Total sales for the first nine months in 1999 was up 4% to Rs 5702 m over the corresponding period in 1998. Operating profit was higher by 8% to Rs 492 m.

(Rs m) 3QFY2000 3QFY1999 Change
Sales 1,641.0 1,704.9 -3.7%
Total Expenditure 1,526.0 1,622.0 -5.9%
Interest 21.4 20.9 2.4%
Profit before Tax 61.0 27.6 121.0%
Tax 24.0 0.0 -
Profit after Tax 36.4 28.0 30.0%

The company's operating margins have improved in the third quarter, which had been under pressure during the first half. Operating margins in the third quarter are relatively buoyant improving from 7.99% 8.52%.

Bata is trying to prune its workforce through a VRS. It is also retiring high cost debts to improve the profitability of the company. But until it settles issues with its workforce it may find it hard to sustain its growth.

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