The Hindu Business Line : Sluggish demand from N. America, Europe — Arvind to shift part of denim capacity to other fabrics

THE Sanjay Lalbhai controlled Arvind Mills Ltd is shifting part of its denim capacity to other fabrics where the contribution is better than that available on basic commodity denim. The move by one among the world's top three denim manufacturers follows sluggish demand from the North American and European markets.

"These markets that account for 80 per cent of the global denim consumption continue to be sluggish. Leading market conditions indicate that the scenario will remain unchanged in the near future," Mr Jayesh Shah, CFO of Arvind Mills, said.

"To mitigate the impact arising out of the given situation, Arvind Mills is looking at alternative markets that were not being serviced earlier. The company is also focusing on enhancing contribution by shifting part of its denim capacity to other fabrics where the contribution is better than that available on basic commodity denim," Mr Shah told Business Line.

"Continued pressure on prices and volume coupled with the strong rupee has resulted in realisation to fall to Rs 101 per metre during the last quarter against Rs 104 per metre in the third quarter of financial year 2003. Sequentially, it has remained stable though (Rs 100/metre in the second quarter of 2004)," Mr Shah added.

The company, which came through a successful financial restructuring, had benefited from the spurt in denim consumption in the matured markets over the last two years. Over 70 per cent of Arvind Mills' denim sales are attributed to exports, while denim accounts for over 55 per cent of the annual turnover.

The company's third quarter net in the current financial year had slipped 48 per cent and it had mentioned about lower denim offtake. Its dependence on denim fabrics is expected to drop as its apparel sales increase from the present level of 10 per cent to 15 per cent.

Arvind Mills also commissioned its jeans plant through its subsidiary in the Mauritius and the shirts plant in Bangalore and is on track on its strategy to emerge as a leading garment manufacturer out of India post quota dismantling.

"The garments division (denim jeans) unit in the Mauritius has already been accredited by a few large international buyers for supplies of denim wear," he added.

"Arvind being the only company with sizeable presence in all the continents, it is working towards spreading the revenue mix in terms of geography. In that sense, the company is looking at the entire global denim market," Mr Shah said.

In terms of overall demand, the global denim market, led by higher growth in women and children segments, is estimated to grow at three per cent to four per cent annually. The company has also been focusing on differentiated and value-added denim as global apparel brands compete to introduce the latest and most innovative garment into the market.

"With focus on fashion, the (denim) business has transformed from that of a simple traditional mill-based product with focus on production to a complex structure involving product development," he added.

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