(Reuters) – India’s Titan reported a 23% fall in second-quarter profit on Tuesday, as a cut in customs duty on gold imports led to inventory losses and shrank margins.
The Tata group company posted a consolidated profit after tax of 7.04 billion rupees ($83.74 million) from 9.16 billion rupees a year ago.
Consumer demand rose significantly after customs duty on gold imports was cut to 6% from 15% in July, aiding growth in plain gold sales for the quarter, Titan had said in its quarterly update earlier.
However, the company’s quarterly earnings before interest and tax margins dropped to 8.7% from 12.8% a year ago as a result of the cut, it said.
Titan already had inventory it had purchased before the cut in import taxes, reducing the average value of its stock during the quarter. Moreover, it had to sell the old inventory at the new, lower market prices after the cut.
The company saw an impact to the tune of 2.90 billion rupees as a result of the customs duty cut, CK Venkataraman, MD of Titan said.
“On account of the customs duty-related losses, as well as the need to invest in the growth of various businesses, the profitability of Q2 was quite depressed,” he said.
Overall sales from its mainstay jewellery business, which includes brands such as Tanishq, CaratLane, and Mia, recorded a 15% revenue growth during the quarter. The unit accounts for 87% of the firm’s total revenue.
Its smaller watches and wearables segment, which houses Fastrack and Xylys watches, recorded a 19% revenue growth in the second quarter, helped by strong demand for analog watches.
Titan’s overall sales rose nearly 26% to 134.73 billion rupees during the quarter.
($1 = 84.0710 Indian rupees)
(Reporting by Ashna Teresa Britto; Editing by Abinaya Vijayaraghavan)
