India's Tata Group-owned Titan Co reported a lower-than-expected quarterly profit on 2 August as its mainstay jewellery segment was hurt due to surging gold prices, which pushed up costs and eroded margins.
Titan, which owns the Tanishq jewellery brand, said its first-quarter profit fell more than 2% to $94.1 mn in the three months ended June 30. Gold prices in India, the second-biggest gold consumer in the world, hit record highs during the quarter, dampening demand and exacerbating Titan's spending on raw materials, which surged nearly 48% from a year ago.
The jewellery division accounts for 89% of Titan's total sales. Expenses climbed about 29%, outweighing a nearly 19% jump in sales. This led to margins on earnings before interest and taxes (EBIT) contracting to 10.7% in the April-June quarter from 13% a year ago.
Centrum research associate Soham Samanta said: "Margins may have fallen because the company had aggressive exchange offers during the quarter, price cuts to try and gain market share, and a focus on bigger revenue from the South Indian market, which is a low-margin business."
Sales grew as people purchased more gold in April to celebrate the annual Akshaya Tritiya festival when buying the yellow metal is considered auspicious.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished
