More Stories

Informist, Friday, Nov. 8, 2024

By Darshan Nakhwa 

MUMBAI – Tyre manufacturer MRF Ltd. on Friday reported a 20% year-on-year decline in its net profit for the September quarter, as its expenses grew faster than its revenue on account of a sharp increase in rubber prices. This and the aggressive pricing adopted by the company are likely to have also weighed on its operating profit and margin for the quarter.

The Chennai-headquartered company clocked a bottom line of INR 4.55 billion for Jul-Sept, slightly higher than analysts' estimate of INR 4.44 billion. This is the third time in a row that the company has recorded a year-on-year fall in the bottom line, with a 20% on-year decline being the highest in the last three quarters.

The company's earnings before interest, tax, depreciation and amortisation margin contracted to 14.4%, from 18.5% in the year-ago period, according to calculations by Informist. The EBIT margin--excluding other income, exceptional costs--was 8.4% as against 12.8% in the year-ago period. Factors such as higher raw material costs, and costs related to employees and other expenses are likely to have impacted its margins.

The company's EBITDA for Jul-Sept was INR 9.73 billion against INR 11.29 billion in the year-ago period, as per Informist calculations. Brokerage firms expected the EBITDA to be between INR 9.65 billion and INR 10.24 billion. 

MRF's overall expenses grew faster than revenue from operations in the September quarter. Total expenses grew 16% on year to INR 62.62 billion, led by an increase in the cost of materials consumed and other expenses. Cost of materials consumed--the biggest expense incurred by the company--rose nearly 27% on year to INR 47.16 billion. Other expenses rose nearly 12% on year to INR 10.31 billion and costs related to employees rose 7.5% on year to INR 4.64 billion. The company's tax outgo for the September quarter was INR 1.55 billion, down 23% from INR 2.02 billion in the year-ago quarter.  

The top line for the quarter was INR 67.60 billion, up 11% on year. Brokerages had estimated MRF's top line at 68.69 billion, driven by an uptick in two-wheeler tyre sales to manufacturers, and replacement demand for passenger car, truck and bus tyres. The company's other income for the quarter was INR 1.12 billion, up 61% on year.

In Jul-Sept, prices of natural rubber were up 52% on year and 20% sequentially at INR 226.5 per kg, according to data from Kotak Institutional Equities. The Tokyo generic first rubber price was up by 63% on year and by 10% on quarter at INR 196.2 per kg. International natural rubber prices witnessed a sharp uptick over the past two months on concerns around global supply shortages due to adverse weather conditions. Also, international natural rubber was trading at a significant premium to domestic natural rubber prices, which may have further pushed up the domestic prices, the brokerage said.

MRF is the country's largest tyre manufacturer and makes tyres for two-wheelers, passenger cars, trucks, buses, and all other heavy vehicles. The company did not disclose tyre sales volume data or provide the quantum of the price hikes taken in Jul-Sept in its earnings press release.

The company reported a weak performance over Apr-Jun. While its top line was down 4.5% from INR 70.78 billion in the June quarter, its bottom line fell by 19% from INR 5.63 billion. Analysts had projected the company to report a weak financial performance on a sequential basis. For Apr-Sept, the company clocked a net profit of INR 10.18 billion, down 11.7% on year. Revenue for the period was INR 138.38 billion, up 11.5% on year.

MRF has declared an interim dividend of INR 3 per share for 2024-24 (Apr-Mar). At 1500 IST, shares of the tyre maker were at INR 119,437.30 on the National Stock Exchange, down 1.3% from the previous day. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.