SRF’s Apr-Jun topline, bottomline up strongly but margin growth muted

21 Jul 2022

Strong profit and sales growth but muted margin expansion marked the earnings performance of SRF Ltd in the quarter ended June.

The consolidated net profit of the company jumped 54% on the year to 6.1 bln rupees and the topline grew significantly by 44% to 39 bln rupees and the operating profit rose 48% to 9.9 bln rupees.

But higher increase in raw material costs, and power and fuel expenses, put the operating margin of SRF on a tight leash with the margin moving up to 25.4% in Apr-Jun from 24.8% a year ago.

It was also lower than 26.8% in the previous quarter indicating that cost pressures increased in the June quarter.

SRF’s sequential growth numbers were weak. The consolidated net profit growth was flat, the topline grew by 9.6% and the operating profit was up by just 4.2%.

The segment that stood out in the on-the-year performance was the chemicals segment while the packaging film segment was steady and the technical textiles segment came in weak.

Chemicals revenue jumped by 55% on the year to 17.2 bln rupees in Apr-Jun and the operating profit from the segment was strong at 2.4 times.

In a post-earnings statement, the company said that in the chemicals segment the fluorochemicals business “performed exceedingly well owing to higher sales volumes in the refrigerants, pharma propellants, and the blends segments with better sales realizations, especially from the export markets.”

The company’s packaging film segment saw revenue rising strongly by 44% on the year to 15 bln rupees and the operating profit growth was moderate at 25%.

During the June quarter, the packaging film segment “witnessed a slight slowdown in demand for BOPET (biaxially oriented polyethylene terephthalate) and BOPP (biaxially oriented polypropylene) films, which impacted the overall margins.”
SRF’s chairman and managing director Ashish Bharat Ram said that the packaging film business was currently seeing strong headwinds due to weak global demand and inventory losses in the short term.

The technical textiles segment performance was weak in the June quarter itself. While it recorded moderate 16% growth in revenue to 5.7 bln rupees its operating profit declined 8%.

SRF today announced new capital expenditure plans.

It said that it will be setting up new agrochemical intermediate product facility with an annual capacity of 1,000 tn at Dahej at a projected cost of 2.5 bln rupees. It will spend another 1.5 bln rupees in expanding existing chemicals intermediate facilities at Dahej.

In the technical textiles segment too the company will spend 1.62 bln rupees over the next three years in capacity expansion and modernisation.