Company own production lifted FY24 output by 93.34% year on year

Company shifted production toward its own customer orders in FY 2023-24, lifting output 93.34% to 162.58 lakh metres from 84.09 lakh metres. The change coincided with job-work revenue falling to Rs 5.10 crore from Rs 17.17 crore and revenue from operations rising 35.29% to Rs 271.488 crore.

Why did Company move from job work to own production in FY24?

Company moved from job work to own production because higher customer orders and expanded installed capacity allowed it to allocate more output to products sold under its own orders. Job work means manufacturing or processing for an outside party, and Company said it had used this activity mainly to utilise idle capacity in FY 2022-23. The filing says that model required minimal raw-material procurement by Company.

The move followed an increase in installed production capacity to 190 lakh metres in FY 2023-24 from 100 lakh metres in FY 2022-23. Company attributed the expansion to the installation and commencement of machinery including rotary printing and jigger dyeing equipment, which operated for about six months during FY 2023-24. Higher capacity and customer orders enabled Company to reduce job work and fulfil more of its own orders.

Job-work revenue declined by Rs 12.07 crore, or 70.30%, to Rs 5.10 crore in FY 2023-24 from Rs 17.17 crore in FY 2022-23. This decline is the clearest reported measure of the operational shift. It also means the increase in Company’s production was directed more toward its own product sales rather than processing work for external parties.

How much did Company’s output and revenue change?

Company’s FY24 output nearly doubled, while revenue rose at a lower rate because production volume and sales value are different measures. Output increased by 78.49 lakh metres to 162.58 lakh metres in FY 2023-24 from 84.09 lakh metres in FY 2022-23. Revenue from operations increased by Rs 70.819 crore to Rs 271.488 crore from Rs 200.669 crore over the same period.

Company sold 157.23 lakh metres in FY 2023-24, which was 5.35 lakh metres below its production of 162.58 lakh metres. Closing stock rose to Rs 16.8452 crore from Rs 11.9775 crore, while the change in inventories was negative Rs 15.8079 crore compared with negative Rs 4.8677 crore in FY 2022-23. The filing links the higher year-end inventory balance to increased operations and output.

Company’s stated capacity utilisation was 85.57% in FY 2023-24, based on its expanded manufacturing base. That level compares output of 162.58 lakh metres with installed capacity of 190 lakh metres. The gap between production and stated capacity indicates that Company did not need to operate at full installed capacity to record the 93.34% production increase.

Why did Company’s material cost rise faster than revenue?

Company’s material cost rose faster than revenue because own production required direct procurement of inputs from vendors. Cost of materials consumed increased 44.41% to Rs 244.7136 crore in FY 2023-24 from Rs 169.4539 crore in FY 2022-23, exceeding the 35.29% rise in revenue from operations. The filing specifically attributes the increase to a shift from job-work material to directly purchased materials.

The additional material consumption was Rs 75.2597 crore in FY 2023-24, compared with a Rs 70.819 crore increase in revenue from operations. This does not establish that material costs alone determined the year’s earnings, because Company also reported lower energy costs and changes in other expenses. It does show that the revenue-mix shift changed the input requirements of production.

Purchases of stock in trade remained small relative to operating revenue. Such purchases increased 7.97% to Rs 1.2751 crore in FY 2023-24 from Rs 1.181 crore in FY 2022-23, but represented 0.47% of revenue from operations, down from 0.59%. Company described stock-in-trade purchases as occasional trading activity undertaken to meet particular customer demand.

The higher production model also coincided with greater employee and borrowing costs. Employee-benefit expenses rose 23.41% to Rs 3.1872 crore as headcount reached 90 at the end of FY 2023-24, compared with 78 a year earlier. Finance cost rose 100.97% to Rs 2.6244 crore after short-term borrowings increased by Rs 11.8993 crore during FY 2023-24.

Did own production alone cause Company’s FY24 profit increase?

Own production did not alone cause Company’s FY24 profit increase, because the filing also identifies lower coal prices, lower fuel expenditure and reduced external effluent-treatment charges. Profit after tax rose to Rs 5.2968 crore in FY 2023-24 from Rs 67.65 lakh in FY 2022-23, while the profit-after-tax margin increased to 1.95% from 0.34%. Profit before tax increased to Rs 7.0831 crore from Rs 92.73 lakh.

Coal prices declined to Rs 4.42 per kilogram in FY 2023-24 from Rs 9.94 per kilogram in FY 2022-23. Coal and fuel expenses declined to Rs 10.1287 crore from Rs 13.9634 crore, even as Company’s production increased. Company also said that external effluent-treatment charges of Rs 49.31 lakh in FY 2022-23 fell to nil after it purchased an effluent treatment plant in the middle of FY 2022-23.

The filing’s adjusted profit calculation shows the importance of fuel costs in the reported margin movement. Adding coal and fuel expenses to profit after tax produced adjusted profit of Rs 15.4255 crore in FY 2023-24 and Rs 14.6399 crore in FY 2022-23, but adjusted profit margin declined to 5.68% from 7.30%. This comparison indicates that lower fuel costs contributed to the reported profit-margin increase alongside higher production and direct sales.

Total expenses rose 32.41% to Rs 264.5709 crore in FY 2023-24 from Rs 199.805 crore, below the 35.33% increase in total income to Rs 271.6538 crore. Other expenses fell 6.66% to Rs 25.6401 crore, and Company reported power and fuel expenses of Rs 10.1435 crore compared with Rs 14.0236 crore in FY 2022-23. The FY24 profit result therefore reflected both the own-production shift and a lower energy-cost environment.

Conclusion

Company’s FY24 own-production shift is evidenced by output increasing 93.34%, job-work revenue declining by Rs 12.07 crore and direct material consumption rising 44.41%. The company generated Rs 271.488 crore in revenue from operations and Rs 5.2968 crore in profit after tax, but the move also increased its dependence on direct raw-material purchases, staffing and short-term funding.

The later FY 2024-25 update shows installed capacity reached 225 lakh metres and capacity utilisation increased to 88.18% from 85.57% in FY 2023-24. Company’s cost of materials consumed also rose to Rs 289.0456 crore in FY 2024-25, while short-term borrowings increased to Rs 48.8013 crore from Rs 27.5396 crore. The next reported results will show whether higher utilisation and own-order production continue to be supported by sales and working-capital funding.