Sri Nachammai Cotton Mills Reports ₹5.38 Crore Profit in Q1, Boosted by Exceptional Income

Sri Nachammai Cotton Mills Limited , a textile manufacturer based in Salem, Tamil Nadu, has reported a significant turnaround in its financial performance for the first quarter. The company posted a net profit of ₹5.38 crores, compared to a loss of ₹3.21 crores in the same quarter of the previous year.

Key Financial Highlights

• Revenue from operations increased by 22.22% to ₹17.00 crores
• Total expenses decreased by 21.37% to ₹19.48 crores
• Exceptional income of ₹6.59 crores contributed to the profit
• Earnings per share (EPS) improved to ₹12.56 from -₹7.48 in the previous year

Financial Performance

The company's financial results show a marked improvement despite ongoing challenges in the textile industry. The revenue growth of 22.22% indicates a recovery in demand for the company's products. However, Sri Nachammai Cotton Mills continues to face headwinds due to poor yarn demand and disparity between cotton and yarn prices.

Exceptional Income and Debt Restructuring

A significant factor in the company's profit was an exceptional income of ₹6.59 crores. This one-time gain resulted from the restructuring of the company's redeemable preference shares. The maturity period of these shares, originally issued in April 2012 for ₹15 crores, has been extended by an additional seven years. This modification led to the recognition of income in accordance with Indian Accounting Standards (Ind AS 109).

Cost Control Measures

Sri Nachammai Cotton Mills has implemented several cost-control measures to improve its financial position:

1. Operating at reduced capacity: The company is currently running only one unit for three shifts due to poor yarn demand.
2. Solar power installation: A 2MW solar plant has been installed to mitigate rising power costs.
3. Reduced power expenses: Power and fuel costs decreased to ₹1.44 crores from ₹1.86 crores year-over-year.

Management Commentary

P. Umayal, Chairman cum Managing Director, stated, "We are implementing various cost-control and efficiency-enhancement measures across operations with the objective of reducing operational losses and improving profitability."

Future Outlook

While the company has shown improvement in its financial performance, it continues to face challenges from market conditions in the textile industry. The management's focus on cost reduction and efficiency improvements will be crucial for sustaining profitability in the coming quarters.

Corporate Actions

The Board of Directors has scheduled the 45th Annual General Meeting for September 26, to be held via video conferencing. The Register of Members and Share Transfer Books will be closed from September 20 to September 26.

Investors and stakeholders should note that while the exceptional income has significantly boosted the company's profits this quarter, ongoing market challenges in the textile sector may continue to impact performance in the near term.