Tyre maker MRF reported a 22.8% year-on-year decline in consolidated net profit to ₹417.19 crore for the September quarter, despite revenue rising 17.4%. A sharp increase in raw material costs weighed on profitability even as demand remained strong in both original equipment and replacement segments.
New Delhi, November 10 — MRF Ltd reported a 22.8% decline in consolidated net profit for the July-September quarter, as a steep increase in raw material costs offset strong growth in sales.
The Chennai-based tyre manufacturer posted a net profit of ₹417.19 crore in Q2, compared with ₹540.13 crore in the corresponding quarter a year earlier.
However, revenue from operations registered strong double-digit growth, increasing 17.4% to ₹8,660.19 crore from ₹7,378.72 crore in the year-ago period.
Strong demand boosts MRF sales
MRF said it was able to capitalise on sustained demand for its products from both the original equipment (OE) and replacement tyre markets.
The strong demand helped the company deliver double-digit sales growth during the second quarter.
However, the increase in sales was not enough to offset the impact of rising costs.
MRF’s total expenses increased 21.8% to ₹8,269.77 crore during the September quarter, compared with ₹6,788.55 crore in the same quarter last year.
Raw material costs jump 43%
Raw material costs emerged as the biggest pressure point for the tyre manufacturer.
The company’s cost of materials surged 43.2% to ₹6,552.57 crore, up sharply from ₹4,577.49 crore a year earlier.
MRF attributed the increase to a steep rise in raw material prices amid global uncertainties, which adversely affected its profitability during the quarter.
Tyre manufacturers depend on several key commodities, making their margins sensitive to changes in input costs.
MRF said price increases and cost-saving initiatives helped partially mitigate these pressures.
Commodity volatility may continue
The company expects volatility and disruptions in commodity markets to continue.
MRF said raw material and logistics costs are expected to remain elevated, indicating that cost pressures could remain a key factor for the company’s performance in the coming quarters.
The tyre maker said it would continue taking measured steps to address these challenges.
Despite the decline in quarterly profit, the company’s board announced an interim dividend of ₹3 per share.
MRF has fixed November 17 as the record date for determining shareholders eligible for the dividend.
The interim dividend will be paid on or after December 1.
The quarterly numbers show a contrasting trend for MRF: strong demand helped deliver a 17.4% increase in revenue, but the 43.2% surge in material costs squeezed margins and resulted in a nearly 23% decline in net profit.Categories: Auto, Corporate, Earnings
