Alok, Supplier to Wal-Mart, Sees 50% Rise in Net as Costs Drop

Alok Industries Ltd., an Indian supplier of sportswear to Wal-Mart Stores Inc. and Target Corp., expects a 50 percent jump in profit in the year from April as it passes higher commodity prices to customers and pays less for fuel.

“Demand from the international and domestic market continues to be buoyant. New capacities will come on board for us, which should contribute to growth for the year starting April,” Sunil Khandelwal, chief financial officer, said in an interview at the company’s corporate office in Mumbai yesterday. The “strong demand” has enabled Alok to “pass on the higher costs” to consumers.

India’s economy has grown an average 8.5 percent annually during the past five years, doubling per-capita incomes. Retail sales in the U.S. returned to pre-recession levels in December, climbing for a sixth straight month as Americans indulged in holiday shopping. Consumer spending accounts for about 70 percent of the world’s largest economy.

Exports contribute about 40 percent of sales, Khandelwal said. The company, India’s second-largest apparel and textile manufacturer by market value, may save 600 million rupees ($13 million) in costs in the year starting April 1, as it pays less for fuel to run its plants, he said.

“We will be shifting to gas-based power from furnace oil, which would help us save on costs,” Khandelwal said, adding that power charges make up about 5 percent of total expenditure.

Profit for the year ended March 2010 rose 31 percent to 2.47 billion rupees, according to Bloomberg data. Earnings may grow as much as 35 percent in the year through March, Khandelwal had said in a July interview with Bloomberg UTV.

The company’s shares gained 22 percent in 2010, compared with a 17 percent rise for the Bombay Stock Exchange’s benchmark 30-stock Sensitive Index, or Sensex. The stock declined 1.8 percent to 24.9 rupees yesterday.

To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net;

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

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