MRF’s Net Up 40% Despite Decline In Revenues

Tyre major MRF's March 2013 quarter net profit rose by 40% to Rs 210 crore due to the lower input costs. Its sales, however, declined by more than 1% to Rs 3227 crore owing to the weak demand in the Auto sector.

During the quarter, the company has seen its raw material costs declining by 8.36%, which is incredible at the time when inflation has remained over 8%. Its total expenses declined by 6.6% to Rs 2555 crore. The company’s inventories also saw a drop which we believe has helped the company reduce the raw material costs. This implies that the EBITDA margins which have surged by 373 basis points to 13.76% in the quarter may not be sustainable.

During the quarter, its other income stood at Rs 5.37 crore. The interest expenses rose by 23% to Rs 50 crore. MRF’s tax rate came in at 31% and in absolute terms, it was at Rs 96 crore.

On the balance sheet front, its long-term debt stands at Rs 1026 crore, down by nearly 7% on a YoY basis. The debt to equity ratio is at 0.31x from 0.38x a year before. Its liquidity ratios have also shown a significant improvement on a YoY basis, which is a good sign for the company.

The result of the company in a weak demand scenario is worth cheering for. The shares of the company surged about 3% at closing today.