Arvind Mills, the Ahmedabad-based denim major, has decided to focus on the European market with new products and efforts to reach more customers directly.
In the last quarter of the current financial year, the company inked deals with Reebok and Outerbank which should boost the knits business.
Arvind has also retained Nike as a customer, which continues to be a major buyer.
The company has also recently chalked out a plan to have its own sales force and distributor network in Europe, which, according to Arvind officials, will help improve realisations.
"We are strengthening our marketing network in Europe as the market has been responding well in recent times. Arvind will also be putting up its own sales force and distributor network in major countries in the continent, including the United Kingdom where we are already doing well," said Jayesh Shah, chief financial officer of Arvind Mills.
The company has also decided to set up garmenting capacities which will help it improve profitability as a high proportion of shirtings are sold as complete garments. The new capacity being set up at Bangalore is expected to be commissioned this October.
The new initiatives have been undertaken by the textile major following its improved performance from the shirting fabrics and shirts business in the first quarter of the current fiscal year.
Shirting revenues grew 2 per cent to Rs 73 crore (Rs 730 million) in the period while price realisations grew 7 per cent to Rs 114 per metre.
"This has been achieved as Arvind focused on product differentiation to enhance margins, just as it had done earlier in denims," said a source.
The company also witnessed a significant rise in turnover from knits at Rs 13 crore (Rs 130 million). Arvind is looking forward at better business from this segment following the deals with Reebok and Outerbank, which is a division of Sara Lee.
The company's subsidiary Arvind Overseas Mauritius has recently invested in spinning and garments capacity. It is also upgrading its denim plant to cater to higher-end consumers.
Commercial production at the spinning plant is expected to commence from October 1 with the first phase of the unit producing 3,000 garments per day, source added.
Arvind posted a sales turnover of Rs 370 crore (Rs 3,700 million) at the end of the first quarter against Rs 354 crore (Rs 3,540 million) at the end of the first quarter in FY 2002-03. Operating profit dipped to Rs 95 crore (Rs 950 million).
Profit before tax rose to Rs 28 crore (Rs 280 million). Export sales were 51 per cent of total sales for the quarter ended June 30 this year.
