Acquisitions Fuel GHCL Profit Gains

Don Hogsett, February 5, 2007

Boosted by its rapidly growing international textile franchise — a mill-to-consumer operation that includes manufacturing in India, Dan River and Baker Linen in the United States, and the Rosebys retail chain in England — GHCL Limited pushed third fiscal quarter profits up by 17.0%, while boosting sales by more than 28%.

Rapidly building a global platform for its textile products through an ongoing acquisition drive, GHCL said sales in the burgeoning textile operation grew by 29% over year-ago levels, and now account for roughly 27% of total company sales, gaining on the core business producing the soda ash used to make glass and detergents.

GHCL, a part of the larger Dalmia Group of companies, said profits in the third fiscal quarter ended in December rose by 17.0%, to $7.0 million from $6.0 million during the same period a year ago. Sales climbed higher at an even faster pace, jumping up by 28.3%, to $49.2 million from $38.4 million a year ago, largely on the strength of textiles acquisitions.

Underlining the fast-track growth in textiles, the company said sales in that business grew by more than two-thirds, or 67%, from the second quarter which ended in September 2006. Contributing to the top-line growth was GHCL's most recent acquisition, New Jersey-based Baker Linen, which markets bedding to the hotel, motel, and cruise line industries, generating roughly $70 million in annual sales. GHCL has quickly consolidated Baker operations into Dan River, and said that in addition to the roughly $70 million in sales, Baker will add about $15 million to Dan River's gross margin.

Without breaking out the profitability of its U.S. or European textiles operations, GHCL said it continued the consolidation of Dan River operations during the quarter and improved its order book position. At the same time, Rosebys improved sales by 10% to about 56 million British pounds, or about $112 million.

GHCL bought century-old Baker Linen, a unit of Best Mfg., in a U.S. Bankruptcy Court auction last year, and is now negotiating to buy the rest of Best Mfg., including the Best operation and its Artex International unit, a table linens supplier.

And it's not finished. Outlining an aggressive expansion plan, Sanjay Dalmia, chairman of GHCL's parent, the Dalmia Group, told Home Textiles Today in December that he is negotiating to buy more European retail chains, and also a large U.S. retailer of home textiles product, in his pursuit of a truly vertical international textiles operation, marrying GHCL manufacturing in India, China, and Pakistan to retail shelves it owns and Europe and America.

GHCL said it continues to ramp up operations in its Vapi, India spinning and weaving operation, which generated about $4.5 million in sales during December, with capacity utilization at 60%.

Reviewing the quarter, Dalmia said, "We have successfully integrated our Indian and foreign operations both in the soda ash and textiles businesses. With the ramping up of Vapi's operations, we expect to consolidate our textiles business and improve margins going forward."

Dalmia added, "We are sensing an attractive business opportunity" combining GHCL's manufacturing with global retail platforms and brands. "Given the strength of our operations and encouraging levels of customer demand, we remain positive on the performance in the coming times."


Qtr. 12/31 (x000) 2006 2005 % change
Because financial reporting regulations in India differ from those in the United States, nine-month financial results and data necessary to calculate average gross margin and SG&A expenses are unavailable. U.S. dollar amounts are converted from Indian rupees using the exchange rate in effect on Dec. 29, 2006, of 1 Indian rupee equals U.S. $0.0226701.
Sales $49,205 $38,362 28.3
Oper. income (EBITDA) 13,983 10,623 31.6
Net income 7,044 6,019 17.0
Per share(diluted) 0.07 0.06 15.4

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