Tyre maker MRF Ltd’s latest quarter profit came in much below estimates mainly as rising employee costs ate into gains from declining raw material expenses.
Net profit dropped to Rs.179.89 crore in the three months ended December from Rs.180.22 crore a year ago, below Bloomberg’s estimate of Rs.222.4 crore.
Net sales improved to Rs.3,540.77 crore from Rs.3,359 crore a year ago, beating the Rs.3,257.6 crore estimate.
“It is disappointing despite a fall in raw material cost (the gain) has been off-set by an increase in employee cost,” a Mumbai-based analyst who tracks MRF said, declining to be identified.
Demand for automobiles remain weak as high inflation and increasing fuel prices have dampened consumer sentiments, Angel Broking Ltd said in a report last month. As a result, revenue growth for tyre makers has remained muted.
Prices of natural rubber, which makes up 40% of the cost of a tyre, have been falling from January 2012, when the price was Rs.195.67 per kg. The average domestic rubber price was Rs.158 a kg in the December quarter, an 8% decline from a year earlier.
But employee costs for the Chennai-based MRF moved up by 30 % to Rs.175.31 for the quarter ended December compared to the same quarter a year ago.
MRF shares closed at Rs.19,359.65 each, down 2.49%, on BSE on Thursday, while the benchmark Sensex index rose 0.25% to 20,310.74 points.
Source: Live Mint
Published: 06 Feb 2014