Financial Daily from THE HINDU group of publications
Friday, Apr 18, 2003
Financial Daily from THE HINDU group of publications Friday, Apr 18, 2003 |
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Corporate
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Performance MRF: Input cost pressure hurts operating profit margins B. Krishnakumar
AFTER logging a sharp growth in earnings in the previous quarters, market leader in the tyre industry — MRF has come up with a relatively subdued earnings performance for the quarter ended March 2003. The turnover increased 17 per cent to Rs 622.35 crore. The growth in turnover appears to have been driven by the increase in passenger car production and the improvement in economic fundamentals during the three-month period ended March 2003. However, the operating profit margin has been under pressure owing to rise in input cost, natural rubber in particular. It has also been unable to revise product prices to neutralise the impact of increase in input cost. This is reflected by the 58 per cent increase in input cost as opposed to a much lower 17 per cent jump in turnover. The growing competitive pressure and the not-so-conducive business environment has inhibited the revision of prices to accommodate the change in input cost. As a result, the operating profit margin has dropped to about nine per cent from 10.76 per cent recorded during the quarter ended March 31, 2002.
The other elements of cost such as interest and depreciation have seen a marginal change in the quarter ended March 2003. The post-tax earnings (devoid of extraordinary income) have logged a 30.81 per cent increase to Rs.17.45 crore which has been stunted primarily by the drop in operating margin. During the quarter, the company has taken credit to the tune of Rs 50.8 crore, which represents prior period income pertaining to excise duty. Taking into account this one-time income, the post-tax earnings works out to Rs 68.25 crore as opposed to Rs 13.34 crore.
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