High Costs, Dividend Maintained

High Costs, Dividend Maintained. . .
Hansavivek KHATAU MAKANJI SPINNING AND WEAVING experienced sharp contraction of margins during the 98th year to June last, owing to all-round rise in costs. Despite a 5 per cent increase in net sales, gross profit dropped by about 20 per cent. Cost of raw materials increased from Rs 456 lakhs to Rs 495 lakhs, and stores and other operating charges rose from Rs 233 lakhs to Rs 260 lakhs; salaries and wages from Rs 314 lakhs to Rs 331 lakhs; and interest charges from Rs 48 lakhs to Rs 65 lakhs. About Rs 1,86,000 were spent on advertisement and publicity in souvenirs, brochures and journals, etc, of political parties. The names of the parties have not been disclosed. The directors say that additional finance required for maintaining the company's operations increased the burden of interest charges. The company has made investment in shares of other companies of Rs 33 lakhs. Of this, quoted investments of Rs 24 lakhs had a market value of Rs 88 lakhs at the year-end. By disposing of some of these investments, the company could improve its liquidity position and reduce borrowings. The other factors contributing to last year's poor results were that the company could not get adequate supplies of imported cotton, theprices of which also ruled higher than in the previous year. Deteriorating conditions in West Bengal during the earlier period and subsequent war with Pakistan in December last, moreover, disrupted distribution channels and resulted in accumulation of finished goods. Sales and deliveries started improving only from April. A power-cut of 8 per cent, from March 27 to June 26. reduced production and stocks dwindled to near normal levels at the year-end. Despite lower earnings, dividend is maintained at 12 per cent. Besides, the board has recommended issue of bonus shares on a one-for-two basis.