SRF Limited, a chemical-based multi-business entity specializing in the production of industrial and specialty intermediates, has released its consolidated financial results for the first quarter ended June 30, 2023. The unaudited results were approved by the Board of Directors during a meeting held on the same day.
Q1 Results:
In the first quarter of the financial year 2023 (Q1FY24), SRF Limited experienced a 14% decline in consolidated revenue, which decreased from Rs 38.95 billion to Rs 33.38 billion when compared with the Corresponding Period Last Year (CPLY). The company’s Earnings before Interest and Tax (EBIT) also saw a significant drop of 37%, falling from Rs 9.38 billion to Rs 5.95 billion in Q1FY24 over CPLY. Similarly, the Profit after Tax (PAT) declined by 41%, from Rs 6.08 billion to Rs 3.59 billion in Q1FY24 compared to CPLY.
Segment Results:
1. Chemicals Business:
During Q1FY24, the Chemicals Business witnessed a 4% decline in segment revenue, which reduced from Rs 16.22 billion to Rs 16.61 billion when compared with CPLY. The operating profit of this segment also decreased by 12%, from Rs 5.20 billion to Rs 4.60 billion in Q1FY24 over CPLY. The Fluorochemicals Business within this segment was affected by subdued demand for refrigerant gases due to mild summers in India and weakened demand for certain industrial chemicals from pharmaceuticals and agrochemical industries.
2. Packaging Films Business:
The Packaging Films Business experienced a substantial 27% decline in segment revenue, which decreased from Rs 14.96 billion to Rs 10.95 billion in Q1FY24 compared to CPLY. The operating profit for this segment witnessed a significant drop of 83%, falling from Rs 2.95 billion to Rs 0.51 billion in Q1FY24 over CPLY. The segment faced challenges due to increased supply in the BOPET and BOPP film segments and a global economic slowdown.
3. Technical Textiles Business:
In Q1FY24, the Technical Textiles Business reported a 19% decrease in segment revenue, which reduced from Rs 5.71 billion to Rs 4.65 billion compared to CPLY. The operating profit for this segment also decreased by 48%, from Rs 1.16 billion to Rs 0.61 billion in Q1FY24 over CPLY. The decline was primarily attributed to margin corrections with certain Nylon Tyre Cord Fabric (NTCF) customers.
4. Other Businesses:
The Other Businesses segment witnessed a 12% increase in segment revenue, which rose from Rs 1.06 billion to Rs 1.19 billion in Q1FY24 compared to CPLY. The operating profit for this segment showed a substantial increase of 243%, rising from Rs 70 million to Rs 230 million in Q1FY24 over CPLY. Both the Coated and Laminated Fabrics Business performed well despite a challenging external environment.
Chairman Comments:
Commenting on the results, Chairman and Managing Director, Ashish Bharat Ram, explained that the significant drop in profits was primarily attributed to the expected downcycle of the Packaging Films Business, which is likely to continue for the medium-term. Additionally, the Chemicals Business was impacted by lower sales in Fluorochemicals due to mild summers and weak demand in the industrial chemicals segment. However, the Specialty Chemicals Business performed as expected, showing growth over the previous year. Ashish Bharat Ram also mentioned that global inventory unwinding might impact the business in the next few quarters. On a positive note, longer-term projects remain on track, and the company aims to maintain its capex momentum.
Capex:
The Board has approved a project to expand the capacity of Anhydrous Hydrogen Chloride (AHCL) used in pharma intermediates at Dahej. The projected cost for this expansion is Rs 160.8 million.