The company witnessed big drop in margins. Rising interest and depreciation charges truncated the bottomline further.

Quarterly Performance

The company witnessed increase in the raw material cost(inclusive of purchase of stock in trade) during first quarter ended June 2017. The raw material cost as % of sales net of stock adjustments rose530 bps to 57.3%. The employee cost fell 57bps to 14% in Q2 FY 17-18. Other expenses fell 100 bps to 18.3%. Resultantly, operating margins slipped 370bps to 10.5%. Operating profit fell 17% to Rs364.41crore on a y-o-y basis.

Despite average natural rubber (NR) prices which is the key input cost being flat on yoy basis, (down marginally 0.8% to Rs 132.7/kg) during the July-Sept 2017 quarter, the company's margins contracted by substantial amount.

With 49% drop in other income to Rs19.72 crore, PBIDT fell 20% to Rs384.1 crore. Interest cost rose 76%to Rs40.22 crore. Depreciation cost increased 31% at Rs138.49crore. Thus, PBT before EO registered 41% dropto Rs205.42 crore. After considering 625 bps increase in the effective tax rate at around 31.75% and 27% drop in tax provision, PAT fell 46% at Rs140.2 crore.

During the quarter, the company earned 60% and 24% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas)respectively. Revenues from APMEA rose 6%. EA registered 1% rise in revenues. The other segment comprising of other business entities which constitutes 16% of overall revenues, registered 72% rise in income.

At the segment front, APEMA business witnessed 31% drop in PBIT at Rs210.83crore and constituted 83% of the total segment profit. Segment profit of EA operations fell 60% to Rs18.29 crore and constituted 7% of segment profit. Profit from other segment stood at Rs25.62 crore, rise of 141%.

Half Year Performance

For the first half ended Sept 17, the company registered 6% rise in revenues to Rs 6759 crore.

The company witnessed increase in the raw material cost (inclusive of purchase of stock in trade) during first half ended Sept 17. The raw material cost as % of sales net of stock adjustments rose810 bps to 59.2%. The employee cost fell 60 bps to 13.6% in H1 FY 17-18. Other expenses fell 180 bps to 17.8%. Resultantly, operating margins slipped 580bps to 9.5%. Operating profit fell 35% to Rs639.68crore on a y-o-y basis.

With 60% drop in other income to Rs26.49 crore, PBIDT fell 36% to Rs666.2 crore. Interest cost rose 49% to Rs74.27 crore. Depreciation cost increased 25% at Rs264.34 crore. Thus, PBT before EO registered 58% drop to Rs327.56 crore. After considering 380 bps increase in the effective tax rate at around 30.2% and 52% drop in tax provision, PAT fell 60% at Rs228.53 crore.

During the period, the company earned 60% and 24% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas) respectively. Revenues from APMEA rose 4%. EA registered 1% drop in revenues. The other segment comprising of other business entities which constitutes 16% of overall revenues, registered 53% rise in income.

At the segment front, APEMA business witnessed 51% drop in PBIT at Rs325.46 crore and constituted 78% of the total segment profit. Segment profit of EA operations fell 70% to Rs42.57 crore and constituted 10% of segment profit. Profit from other segment stood at Rs47.79 crore, rise of 210%.

The stock closed 3.1% lower at Rs 237.05 on 02 November 2017, the following day after earnings were announced.