Kuruwita Textile Mills Plc (KTM), part of Brandix group recorded a net loss of Rs. 282 million for the nine months ended 31st December 2010 against net profit of Rs. 54 million during the same period of the previous year.
Aslam Omar, Chairman KTM said low order volumes the company received during the period under consideration and the high price sensitivity in the US market significantly eroded the profitability of the company which supplies treated fabric to garment manufacturers.
"We have seen declines in turnover between 22% - 81% from our US customers such as GAP, VSD, Columbia and Tommy, whilst our European customers too recorded a decline, affecting the company's turnover by between 5% - 20%. The lower turnover figure combined with an all-time high cotton price resulted in the conversion of a gross profit in the first nine months of the last financial year of Rs. 311mn to a loss of Rs. 124mn during the year under review" Omar pointed out.
However, the chairman noted that the company was aware of the current decline in profitability and was doing everything possible to turn around company performance.
"The management has begun to take informed steps for this purpose such as reducing wastage and realigning systems, making improvements to the conversion process with the view of reducing conversion costs and procuring the talents of a technical partner. Also plans are underway to strengthen the Board of Directors by appointing a new Managing Director/CEO to the board" Omar noted.
According to the company interim report filed to the Colombo Stock Exchange, Selling, General and Administrative Expenses (SG&A) have increased by 14.7% in comparison to the same period of the last financial year.
He also said that the KTM management has begun to take informed steps in reducing wastage and realigning systems and procedures with a view to reducing losses and regaining profitability.
"In addition, improvements are being studied to the conversion process in order to reduce the conversion cost which will enable the company to mitigate the adverse impact of the cotton price hike. It has been observed that the company would be able to achieve better competitiveness in the event it is able to procure the talents of a technical partner. This has been evident throughout the industry where strong local and regional players have combined with the expertise of renowned technical partners, emerging as leaders in their respective segments," Omar said.
source - www.dailymirror.lk
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