SRF Q4 Results: Profit Dips 24%, Margin Plunges, Chemical Revenue Slumps 14%; Management Optimistic

Chemicals manufacturer SRF Ltd recorded a 24% year-on-year decline in its consolidated net profit, totalling Rs 422 crore for the fourth quarter of FY24. The company, in a regulatory filing, revealed that in the same period last year, it had posted a net profit of Rs 562 crore. The firm reported revenue from operations of Rs 3570 crore, a 5% decrease from the Rs 3778 crore recorded a year ago.

Operating on a diminished scale, SRF Ltd's EBITDA plummeted by 25% to Rs 696 crore compared to Rs 932 crore in the previous fiscal year. The EBITDA margin also experienced a decline, standing at 19.5% as opposed to 24.6% in the corresponding period last year.

Ashish Bharat Ram, the Chairman and Managing Director, acknowledged the challenging landscape, remarking, "While the general performance has been weak, we have seen a reasonable recovery in our Chemicals Business in the fourth quarter, as we had envisaged. We believe that this recovery will pick up pace in the second half of FY25."

Within the Chemicals Business, segment revenue witnessed a decline of 14% from Rs 2,102 crore to Rs 1,816 crore during Q4FY24 compared to the same period the previous year. The Specialty Chemicals segment faced headwinds due to inventory rationalization by certain key customers. Additionally, pricing pressure on intermediate products due to increased capacity in China adversely impacted the performance of the Fluorochemicals Business.

Furthermore, sluggish growth in the agrochemical and pharmaceutical industries affected the demand for key industrial chemicals. However, amidst the challenges, the company managed to increase market share in the Dymel/propellant vertical in both domestic and international markets, expanding into new geographies and widening its customer base.

The repercussions of these financial results were reflected in the stock market, with SRF Ltd shares ending Tuesday's trading session with cuts of over 7% at Rs 2,405.45 per share on the National Stock Exchange (NSE). The stock has given muted gains of 2% over the last one year.

Looking forward, SRF Ltd remains optimistic about the future, anticipating a rebound in the Chemicals Business in the second half of FY25. The management expresses for further improvement in the latter half of the current financial year.

Addressing the hurdles faced during the quarter, the company highlighted challenges within the speciality chemicals segment, attributing them to inventory realisation by key customers. However, despite these obstacles, the segment managed to outperform expectations set in Q3. Furthermore, pricing pressure on intermediate products intensified due to capacity additions in China, adding to the complexity of the operating environment.

The challenges faced by SRF were echoed across the industry, as peer Gujarat Fluorochemicals forecasted a stagnant or slightly softened fluorochemicals business for the financial year 2025. SRF's own fluorochemicals business bore the brunt of the Chinese dumping of refrigerants in both Indian and international markets, resulting in pricing pressure and diminished volumes.

Nevertheless, SRF remains cautiously optimistic about the medium-term prospects of its fluorochemicals business, anticipating a shift in demand towards global suppliers with multi-locational facilities. This strategic outlook underscores the company's commitment to adaptability and resilience in navigating market fluctuations.

Amidst the challenges in the chemicals sector, SRF found solace in the performance of its technical textiles business, which saw a 9% growth compared to the previous year. Notably, coated fabrics reported their highest-ever sales during the quarter, further underscoring the company's diversified portfolio and ability to capitalize on emerging opportunities.

Established in 1970, SRF has grown into a multi-business chemicals conglomerate, with a rich history starting from its Nylon Tyre Cord plant in Manali, Tamil Nadu. Presently, the company operates across various verticals, including CB (Chemicals Business), PFB (Packaging Films Business), TTB (Technical Textiles Business), and other segments. In fiscal 2023, these verticals contributed 50%, 35%, 13%, and 2% respectively to the company's revenue stream.