Pressures on bottomline margins to stay: MRF

Koshi Varghese, Executive VP Marketing, MRF said that there were cost pressures coming in due to high natural rubber and crude derivative prices. He added that the high costs were not passed on to the final consumer and that has affected the company’s bottomline. He sees the margin pressures to continue in the ensuing quarters.

Excerpts from CNBC-TV18’s exclusive interview with Koshi Varghese:

Q: There seems to be pressures on margins. What were the cost and margin pressures?

A: The cost pressures over the last quarter were due to the steep increase in both natural rubber and crude derivatives. Rubber prices, which were at about Rs 80-90 per kg is close to Rs 113-114 per kg now.

There was a very steep increase in crude derivatives like butadiene and other materials. The weighted average price increase or the cost-push over the quarter could be over 20%. That is a very steep cost-push. We have not passed it on because market sensitivity and demand has to be kept in mind. That has impacted our bottomline.

Q: How do you see the margins panning out for the current quarter? Would you expect that you continue to see greater margin pressures or have they stabilised?

A: There has been some stability on the crude front over the last one week. But we do not know whether that is long-term margins will continue to be under pressure in the ensuing quarter. We see no respite from that. With the market demand being what it is we will see our margins being under pressure even for the next quarter.

Q: Your topline growth has come in at about 12%. Do you expect to maintain a similar sort of topline growth, and are there any new cash cows from the aircraft or the conveyor belt space that you are looking at to expand on your topline?

A: Some of the expansions on the anvil are long-term, which we don’t see taking place immediately in this quarter. Hopefully, we will try to keep the topline growth intact. But the bottomline as I told you will be under pressure.