Gujarat Fluoro declines 2% on dismal quarterly show

The dismal earnings of Gujarat Fluorochemicals sits in-line with the weakness felt across the chemicals sector.

Gujarat Fluorochemicals was trading more than 2 percent down in the early trade on August 7, pulled own by the company's dismal performance in the April-June quarter of the current fiscal.

The chemicals company's net profit slumped 34 percent on year to Rs 201 crore. The decline was also a result of the company's weak operational performance, as the EBITDA margin eroded to 17 percent from 23 percent seen in the base quarter.

The topline, too, was down 9 percent at Rs 1,209 crore from Rs 1,334 in the corresponding quarter of the last fiscal.

The company's weak performance can be attributed to sluggish demand due to destocking of high-cost inventory and pricing pressure across segments. Brokerage firm ICICIdirect also said global inventory destocking, pricing pressure and delay of orders from customers affected the business of Gujarat Fluorochemicals.

At 10.02 am, Gujarat Fluorochemicals was trading at Rs 2,775.55 on the NSE, down 1.1 from the previous close. The stock also hit a low of Rs 2,735.70 earlier in the session.

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The company expects demand and prices to remain muted for bulk chemicals over the next few quarters. As for refrigerants, the outlook is more optimistic as the company anticipates demand to grow stronger from the second half of the current fiscal, especially in the overseas markets.

ICICIdirect said the company's capital expenditure plans of Rs 1,500 crore aimed towards expanding capacities in fluoropolymers, refrigerant gases and battery chemicals and ramping up of fluorochemicals plants would help it clock strong revenue growth in the coming quarters.

"Moreover, increasing applications of fluoropolymers especially in sectors like EV, solar panels, 5G and more will help the company report good numbers in its fluoropolymers business going ahead," the brokerage said in a report.

The company also expects an improvement in revenue from fluoropolymers in the upcoming quarters, led by a better product mix. "Volumes for the segment are also likely to pick up gradually with reduced impact of destocking and increase in capacity utilisation of new fluoropolymers," the company said in an exchange filing.

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