Arvind Ltd. :ARVI10-US: Earnings Analysis: Q3, 2017 By the Numbers : January 30, 2017

Arvind Ltd. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Arvind Ltd. – Unifi, Inc. and Culp, Inc. (UFI-US and CFI-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 343.14 million, Net Earnings of USD 11.17 million.
  • Gross margins narrowed from 31.17% to 29.81% compared to the same period last year, operating (EBITDA) margins now 9.67% from 12.78%.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 343.14 346.99 313.63 342.93 325.66
Revenue Growth (%YOY) 5.37 8.38 6.68 4.81 -2.13
Earnings (mil) 11.17 10.73 10.95 16.35 15.64
Earnings Growth (%YOY) -28.58 -22.93 20.12 110.57 -10.85
Net Margin (%) 3.26 3.09 3.49 4.77 4.8
EPS 0.04 0.04 0.04 0.06 0.06
Return on Equity (%) 10.31 9.9 9.78 14.61 14.74
Return on Assets (%) 3.55 3.41 3.37 5.03 4.96

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Market Share Versus Profits

Revenues History
Earnings History

ARVI10-US‘s change in revenue this period compared to the same period last year of 5.37% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ARVI10-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.11% and earnings by 4.13% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 31.17% to 29.81%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 12.78% to 9.67% in this time frame. For comparison, gross margins were 28.36% and EBITDA margins were 9.27% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 9.74% to 6.52% and (2) one-time items that contributed to a decrease in pretax margins from 6.66% to 4.44%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Arvind Ltd. engages in the manufacture and trade of textile products. It operates through the following segments: Textiles, Brand and Retail, Real Estate, and Others. The Textiles segment produces and distributes fabric, yarn, and garments. The Brand and Retail segment deals with retailing of branded garments, apparels and fabric, and cosmetics. The Real Estate segment develops properties. The Others segments comprises of electronics, technical textile, e-commerce, construction and project activities. The company was founded on June 1, 1931 and is headquartered in Ahmedabad, India.

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