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Informist, Thursday, Feb. 6, 2025

By Aman Aryan

MUMBAI – MRF Ltd. reported the highest on-year fall in its net profit in 11 quarters as the rise in the company's raw material costs outpaced the increase in revenue for the December quarter. The company's net profit has declined on-year for four quarters in a row after it grew for five quarters between the December quarter 2022 and the December quarter 2023.  

The tyre manufacturing company's net profit of INR 3.07 billion for the quarter, its lowest in the last eight quarters, was down 40% on year. MRF's net profit missed the Street's view of INR 4.22 billion despite booking the strongest revenue growth in eight quarters. Its revenue for the period rose 14% on year to INR 68.83 billion. While its revenue outperformed the estimates, its net profit fell short of the lowest estimate by around 25%. Sequentially, the net profit fell 33% while its revenue rose 2%. 

The Chennai-based company reported a 21% increase in its total expenses, which was INR 65.67 billion. This was mainly driven by a 24% on-year increase in raw materials costs and over 15% rise in depreciation. The company's cost of materials consumed was INR 46.34 billion and depreciation and amortisation related expenses were INR 4.14 billion for the December quarter.

Analysts also expected higher input costs to offset the MRF's higher revenue growth for the December quarter. Cost of materials consumed accounted for around 71% of MRF's total expenses for the quarter. Prices of natural rubber, a critical raw material for the company, fell over 15% sequentially but rose 27% on year to INR 191.4 per kilogram in the quarter, according to data from Kotak Institutional Equities. MRF's other expenses also rose nearly 8% to INR 10.23 billion during the reporting quarter.

Shares of MRF, which traded 0.2% lower before the company declared its earnings, fell further to trade 4.2% lower at one point. At 1400 IST, however, MRF's shares pared some losses to trade 1.2% lower on the National Stock Exchange at INR 113,610.50.

MRF's operating profit margin contracted by 5.62 percentage points from the year-ago quarter to 5.63% for the December quarter. Its interest service coverage ratio also fell to 16.73 for the December quarter from 17.78 a year ago. Its interest service coverage ratio was 22.5 in the previous quarter. The company's annualised inventory turnover, which measures efficiency in managing stock, fell to 5.05 for the quarter under review from 5.54 a year ago.  

The company will pay a second interim dividend of INR 3 per share for the current financial year. It has set Feb. 14 as the record date for the dividend payout, MRF said in an exchange filing.  

For the nine months ended December, the company's net profit fell 20% on year to INR 13.25 billion, while its revenues rose 12% on year to INR 207.21 billion.  End

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

Edited by Akul Nishant Akhoury

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