Specialty chemicals giant SRF Ltd. (NS:SRFL) has reported a significant drop in profits for the July-September quarter, citing rising expenses and subdued market performance. The company’s net profit plunged by 33% to INR 201 crore, a sharp decline from the INR 301 crore posted in the same period last year, and well below market expectations of INR 290 crore.
Despite an overall revenue growth of 7.8%, reaching INR 3,424 crore, this figure also fell short of analysts’ projections of INR 3,523 crore. The company's profitability was further impacted by a contraction in its Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA).
EBITDA stood at INR 538 crore, a 13.4% year-on-year decline, missing the estimate of INR 651 crore. SRF’s EBITDA margin narrowed significantly by 400 basis points, falling to 15.7%, compared to 19.7% in the same quarter last year. Analysts had expected margins around 18.5%, indicating a deeper-than-anticipated hit to the company’s core performance.
In the wake of these challenges, SRF has announced strategic investments aimed at long-term growth. The company’s board has approved a major capacity expansion at its Dahej facility, with an investment of INR 1,100 crore. This expansion will focus on the production of fourth-generation refrigerants, which have a much lower global warming potential (GWP), aligning with global sustainability goals. The plant is expected to be operational within 30 months and will be funded through a mix of internal accruals and borrowings.
In addition to this, SRF plans to invest INR 445 crore to set up a BOPP-BOPE film unit in Indore, further bolstering its packaging film business.
SRF’s stock reacted negatively to the earnings report, falling 4.3% to INR 2178.1. Despite the current pressures, SRF’s Chairman and Managing Director, Ashish Bharat Ram, remains optimistic about the future. He acknowledged the challenging quarter but expressed confidence that the worst is behind the company, forecasting improved performance in the upcoming quarters with a strong finish to the year.
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