SRF – Q1FY24 update
SRF is a chemical based multi business entity engaged in the manufacturing of industrial and specialty intermediates. The company’s diversified business portfolio covers fluorochemicals, specialty chemicals, packaging films, technical textiles, coated and laminated fabrics. SRF has four major business segments, specialty chemicals, fluorochemicals, technical textiles and packaging films.
Muted June Quarter 2023 Results
SRF reported weak Q1FY24 performance with revenues falling 14% to Rs 3,338 crore and net profit declining 41% to Rs 359 crore compared to Rs 608 crore in the same quarter previous year. Operating margin came in at 20.86% in June Quarter 2023 contracting more than four percentage points YoY due to lower margins in technical textiles and packaging films. Speaking on Q1FY24 results, Chairman and Managing Director, Ashish Bharat Ram said, “While we have seen a significant drop in our profits, a large portion is attributable to the expected downcycle of the packaging films business. This is expected to continue for the medium-term.” He further added that the chemicals business was affected by lower sales in the fluorochemicals business due to a very mild summer and general weakness in the industrial chemicals segment. “The specialty chemicals business has performed as per our expectations with growth over last year. There is a lot of inventory unwinding going on globally and this will have some impact on the business in the next couple of quarters. On the positive side, the longer-term projects remain on track, and we expect to keep our capex momentum intact”, said Ashish.
Specialty chemicals business stable
Chemical business reported revenues of Rs 1,660 crore falling 4% YoY in Q1FY24. The chemical business constitutes specialty chemical business and fluorochemicals. Specialty chemicals business comprises of intermediates API and other applications, contract manufacturing and custom research & synthesis. Fluorochemicals business comprises refrigerants, pharma propellants, industrial chemicals and fluoropolymers. The specialty chemicals business performed well despite weak global demand and inventory rationalization. The performance of the fluorochemicals business was impacted due to mild summers in India, resulting in sluggish demand for refrigerant gases. According to the management, de-stocking of HFCs will continue in the short-term. However, in the long term global demand outlook for refrigerant gas remains strong and sustainable.
Packaging film business will take time to recover
Packaging films business reported revenue decline of 27% YoY to Rs 1,095 crore in Q1FY24. During the quarter, the business faced headwinds on account of significant supply addition in the bi-axially oriented polyethylene terephthalate (BOPET) and bi-axially oriented polypropylene (BOPP) film segments and global economic slowdown. According to the management, the aluminium foil project is on track and expected to be commissioned in Q3 FY24. Speaking on poor packaging performance, Rahul Jain, CFO, SRF, said, “This is a down cycle that the business is witnessing, which is probably one of the worst that has been seen over the past few years. Only passage of time will correct the situation as demand continues to grow and announced expansions get deferred or delayed.”
Technical textiles business impacted by nylon tyre cord fabric segment
The technical textiles business reported a revenue decline of 19% YoY to ₹465 crore in Q1FY24. Technical textile business includes tyre cord fabrics (nylon & polyester), belting fabrics and polyester industrial yarn. The technical textiles business was impacted due to margin correction with some nylon tyre cord fabric (NTCF) customers. In Q1FY24, the solid woven fabric, a crucial product for the belting fabrics portfolio has been successfully commissioned. This is a significant step in meeting the growing demand for high-quality belting fabrics in the market.
