SRF Q2 Results: Sales up 6% from last year but operating performance a miss

Specialty Chemicals manufacturer SRF Ltd. reported results on Monday, October 27, which were marginally below what a CNBC-TV18 poll had anticipated on the operating front.

SRF reported a revenue growth of 6.3% from last year to ₹3,640.2 crore from ₹3,424. The figure is below a CNBC-TV18 poll, which had projected the figure to be ₹3,852 crore.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the quarter increased by 44% on a year-on-year basis to ₹774.2 crore. However, the EBITDA figure was also below the CNBC-TV18 poll projection of ₹837 crore.

EBITDA margin expanded by over six percentage points to 21.2% from 15.7%, but also missed the poll expectations of 21.7%.

Net profit for the period stood at ₹388 crore, also missing expectations of ₹454 crore from the CNBC-TV18 poll.

Chairman and Managing Director Ashish Bharat Ram said that the company is dealing with a very uncertain global environment but remain confident of a good finish to the year.

SRF's chemicals business revenue increased by 23% from last year to ₹1,667 crore, while operating profit nearly doubled. Within the business, fluorochemicals reported record sales volumes for refrigerants.

The Performance Films and Foil business saw a decline in revenue to ₹1,408 crore from ₹1,421 crore last year. Operating profit for the segment though, increased by 44% on a year-on-year basis with margins seeing growth in the value-added product segment.

Technical Textile business saw a decline of 11% in its revenue to $474 crore, while operating profit fell by 41% from last year. The segment faced significant headwinds during the quarter due to aggressive import pricing of Nylon Tyre Cord Fabrics and Belting Fabrics from China, and low demand for Polyester Industrial Yarn.

SRF has also enhanced its capex from ₹595 crore to ₹745 crore, in-line with the company's strategic collaboration with The Chemours Company for manufacture and supply of fluoropolymers and fluoroelastomers. The project will be completed in a sequential manner with the final phase scheduled for completion by December 2026.

Additionally, SRF President and CFO Rahul Jain will be stepping down to pursue other professional opportunities. The company is in the process of identifying a successor for a smooth transition.

Shares of SRF are trading 3% lower after the earnings announcement at ₹2,990. The stock had risen 8.4% in the last one month in the lead up to the results.