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Century: Window dressing to save face

Oct 24, 2000

Century Textiles has posted a net loss of Rs 32 m for the quarter ended September 2000. The company has been able to minimize losses largely due to a rise in other income and a substantial decline in provision for depreciation. Operationally, however, the company's performance continues to deteriorate.

(Rs m) 2QFY00 2QFY01 Change
Net Sales 5,028 5,268 4.8%
Other Income 148 235 58.1%
Expenditure 4,650 4,902 5.4%
Operating Profit (EBDIT) 379 366 -3.2%
Operating Profit Margin (%) 7.5% 7.0%  
Interest 485 447 -7.9%
Depreciation 359 185 -48.4%
Profit before Tax (317) (30.9) -90.2%
Other Adjustments 23 -  
Tax 1 1  
Profit after Tax/(Loss) (295) (32) -89.3%
Net profit margin (%) -6.3% -0.6%  
No. of Shares (eoy) 93.1 93.1  
Diluted Earnings per share* (13.6) (1.4)  
P/e (x) NM NM  

The decline in depreciation can be attributed to the company’s decision to not provide for depreciation pertaining to some of its units. For this it has sought permission from the government. The move is aimed at shoring up its bottomline.

We have projected a 10% revenue growth for the full year. Our profit forecast at Rs 226 m seems to be on the higher side, but in view of the company’s policy to avoid providing for depreciation and the improvement in the textiles business, is achievable. Also, there is a likelihood that in coming months the pricing environment in the cement sector will improve.

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