Chennai: MRF Ltd, the Chennai-based tyre major, has reported a sixfold increase in net profit on the back of a 25% increase in sales for its second quarter ended March 2007. The higher sales, in turn, came on the back of higher demand for passenger cars and, as a corollary, tyres. The company’s accounting year runs from October to September.
Earnings per share (EPS), the share of profit each equity share earned, increased to Rs84.28 in the quarter ended March 2007, as against Rs13.77 a year earlier.
Operating margin, which is the operating profit expressed as a percentage of sales, improved by 330 basis points or 3.3% to 9.7% in the period under review, as against 6.4% in the corresponding quarter in the previous year. This means that the company earned an additional Rs3.30 for every Rs100 of sales.
The shares of the company on the Bombay Stock Exchange gained 6.15% or Rs210 on Thursday to close at Rs3,626.10. In the last one month, the MRF stock has gained 5.64%.
India’s fast growing economy has resulted in higher sales of automobiles, which has resulted in higher demand for tyre manufacturers such as MRF. New car sales crossed the one million-mark for the year ended March 2007. However, higher cost of inputs such as rubber and low margins from selling tyres to automobile manufacturers directly resulted in pressure on profits for tyre makers in the past.
Despite this, MRF’s total income increased by a fourth to Rs1,087 crore, as against Rs880 crore in the quarter ended March 2006. Operating profit was at Rs105 crore in the January-March 2007 quarter as against Rs56 crore in the corresponding quarter last year. Net profit increased to Rs35.7 crore compared with Rs5.8 crore in the second quarter ended March 2007.
For the six months ended March 2007, MRF reported a net profit of Rs65 crore as against Rs20 crore in the corresponding six-month period ended March 2006, an increase of 228%. Total income during the same period rose by 24% to Rs2,149 crore, up from Rs1,699 crore in the corresponding six months of the previous year.