Though margins came under pressure in 1995-96 itself, the company posted a net loss of Rs 85 crore during 1997-98 for the first time in the last seven years. Similarly, gross profits were also at the lowest level than at any other time in the last seven years.

Everything, from demand to raw-material prices, has gone against the company. All the three sectors it operates in--textiles, cement and paper-- performed badly during 1997-98. While the textile and cement divisions contributed 37 per cent each to the sales, the paper divisions contribution was around 17 per cent. The rest came from chemicals and other activities.

Although the performance from all divisions was far from impressive, margins fell drastically mainly on account of the poor performance from the paper andcement units. As a result of cheaper imports and slowdown in demand, realisation from paper has fallen from Rs 30,670 per tonne to Rs 29,310 per tonne. Similarly, realisation from the cement division also received a major setback, falling from Rs 1,996 per tonne to Rs 1,886 per tonne. At the same time, the cost of operation kept on increasing. For instance, the cost of limestone has risen from Rs 81.60 per tonne to Rs 87.15 per tonne.

Although realisations from the textile division did show some improvement, the benefit was offset on account of an increase in the raw-material prices. The entry into the denim segment also proved to be a little late. By the time the company entered the denim market, it was overcrowded on account of a sharp increase in capacities from other players and a less-than-expected growth in demand, due to a shift towards the gaberdine market. In the first year of operations, the denim division contributed Rs 51.61 crore to the sales. In the future too, the sector will face much morecompetition.

The performance on the inventory front has improved during 1997-98, but the average credit period given to the customers have risen. While the average inventory has declined from 86 days to 76 days, the average credit period given to the customers have risen from 40 days to 49 days.

Overall, while the net sales have jumped 11.31 per cent to Rs 1,950 crore, the raw-material cost has risen by 14.65 per cent to Rs 493 crore, putting pressure on the operating-profit margins. Freight and forwarding charges have also jumped 20 per cent.

The poor performance apart, other factors like a bonus issue and the sub-division of Rs 100 paid-up shares into Rs 10 paid shares also failed to help the sliding stock price. In fact, the additional paper supply on account of a bonus issue and sub-division further accelerated the fall.

From shareholders point of view, a bonus issue certainly was not the best idea to improve the stock price. Perhaps, the erosion in the stock price would have been less without abonus issue.

As far as the sub-division of the stock is concerned, a lower face value is favourable for capital appreciation only when the markets are rising. In a falling market, a lower-value stock tends to fall at a faster pace and vice-versa. Although the stock has become more liquid after the sub-division, the liquidity has attracted more short-sellers, as the performance of the company continues to be far from impressive.

While the recent past was undoubtedly unimpressive, the business scenario has not changed dramatically either. Conditions in cement, textile and paper have not shown any improvement, and will continue to remain depressed, at least in the short-term.

While industrial revival is not in sight, for an upsurge in the stock price, what is required is a hope of recovery in these sectors. But at present, the market for this stock does not even reflect a hope for a revival. Till that happens, the stock will continue on its southward journey. But as and when these sectors do bounce back,Century Textiles will be among the major gainers.