Mumbai: MRF Ltd, India’s top tyremaker on Wednesday said net profit for April-June nearly halved, despite robust sales, hurt by soaring prices of raw material, especially rubber.
The firm reported a quarterly net profit of Rs615.9 million compared with Rs125 crore a year ago. Net sales rose over 34% to Rs1,924 crore, reflecting strong demand from Indian automakers whose sales are booming.
“The quarter was pretty bad for MRF despite the fact that its topline rose. This just shows MRF is not able to pass on the rise in raw material costs to the OEMs (original equipment manufacturers),” said Kishor Ostwal, chairman at CNI Research.
Prices of natural rubber that make up over 40% of a cost of a tyre, had hit a record high of Rs18,400 per 100 Kg, earlier this month, Rubber Board data showed. Natural rubber prices have risen 32% to Rs18,350 per kg this year.
MRF’s raw material costs rose 78% on year to Rs1,367 crore during the June quarter.
“MRF will have to negotiate with the OEMs to pass on the costs but it won’t be easy as competition is high,” Ostwal said, adding he sees profit margins to continue to be under pressure in July-Sept.
On Tuesday smaller rival Ceat Ltd also reported a 77% fall in June quarter net profit. Apollo Tyres, the country’s second largest tyremaker is scheduled to report results on Thursday.
India’s top tyre firms have raised prices at least thrice this calendar year but officials have said the increases were not sufficient to protect margins.
MRF shares closed down 2.57% at Rs7,493.65 in a weak Mumbai market.