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MRF reports disappointing 2Q results - Views on News from Equitymaster
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  • Apr 20, 2000

    MRF reports disappointing 2Q results

    MRF has reported a fall in its net profit by 34% for the 2QFY2000 to Rs 209 m as compared to Rs 316 m reported by the company in the 2QFY99. The main reasons for this decline are a fall in operating profits by 16% YoY which was driven by a decline in sales and increase in operating expenses.

    MRF is India's largest tyre manufacturer with a 22% market share. MRF's strengths include strong brand image, market leadership, and conservative and focussed management. It has reported a turnover of Rs 11.2 bn for the 1HFY2000.

    (Rs m) 2QFY99 2QFY2000 Change
    Sales 5,629 5,508 -2.1%
    Operating expenditure 4,804 4,815 0.2%
    Operating profit 824 692 -16.0%
    Operating profit margin (%) 14.6% 12.6%  
    Interest 156 162 3.5%
    Depreciation 245 264 8.0%
    Profit before Tax 423 266 -37.1%
    Tax 108 58 -46.5%
    Profit after Tax/(Loss) 316 209 -33.9%
    Net profit margin (%) 5.6% 3.8%  

    The operating margins were under pressure and fell from 14.6% in the 2QFY99 to 12.6% in the 2QFY2000. The main reasons for this decline are higher competition in the tyre industry which lead to price and discounts wars and increase in the cost of raw materials of the company. Rubber prices have been on the rise over the last couple of months. As other companies have reduced prices of tyres in the last few months MRF was adverse to this. Hence this lead to a fall in the company's sales. MRF has a 25% market share in the radial tyre market.



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