MRF has announced 45.4 per cent growth in net profit for its second quarter ended September 2015. Despite lower sales, profit grew due to cheaper raw materials. Net profit this time reached Rs 460.73 crore compared to Rs 316.91 crore in the corresponding period last year.
The net sales, however, took a dip by 6.2 per cent to generate Rs 3,327.21 crore. The overall slowdown in the auto sector can be blamed for the low revenue. According to some analysts, the rising import of Chinese tyres has definitely made a dent in Indian tyre industry. The recent devaluation of yen has only boosted this effect.
Milan Desai of Angel Broking said, “The Indian tyre sector continues to face the heat from cheaper Chinese imports that have flooded the Indian market in the TBR (Truck and Bus Radial) segment.”
The EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) margins also improved for the company and was reported to be 24.1 per cent this time versus 18.1 per cent in the same period last year. Last month, the company had announced price cuts on its radial tyres, but some analysts are worried that this will affect the profit margins. However, the tyre maker believes that it needs to acknowledge the challenge and improve sales volume.
MRF is also planning to launch its range of two-wheeler tyres, which can boost the sales volume further. According to the Society of Indian Automobile Manufacturers, sales of two-wheelers are growing every year since 2009-10 and have reached 16 million figure by 2014-15. However, passenger car sales have not improved since 2012-13 and sales of commercial vehicles have dropped to 6,14,961 from 8,09,499 units in 2011-12.
MRF is one of the largest tyre manufacturers in India and has eight production plants in the Southern region of the country.