MRF Q2 result: Profit skids 28% to ₹369 crore as raw material costs surge

MRF Ltd reported a 28% year-on-year (YoY) decline in standalone net profit for the September quarter, as a sharp increase in raw material costs squeezed margins despite strong demand for tyres. 

The tyre maker's net profit fell to ₹369 crore in the July-September quarter of FY27, from ₹512 crore in the corresponding quarter last year. 

Revenue from operations, however, rose nearly 18% YoY to ₹8,524 crore, indicating sustained demand across its product segments. The increase in input costs outpaced revenue growth, with total expenses rising more than 22% during the quarter. 

Raw material costs weigh on margins 

The sharp increase in expenses was largely driven by higher material costs. The cost of materials consumed surged around 44% during the quarter, reflecting elevated prices of key inputs, particularly natural rubber. 

Indian tyre manufacturers have been facing higher raw material costs amid supply constraints and adverse weather conditions in key producing countries, which have kept natural rubber prices elevated. Disruptions linked to geopolitical tensions in the Middle East have also added to cost pressures. 

Tyre makers have responded by increasing product prices to offset the impact of higher input costs. However, the pace of cost escalation continued to weigh on profitability during the quarter. 

Demand remains resilient; peers also feel the pressure 

Demand for tyres remained resilient during the July-September quarter, supported by steady dispatches from automobile manufacturers. However, the increase in input costs has emerged as a key challenge for the industry. 

MRF's peers, JK Tyre & Industries and other tyre makers, also reported lower second-quarter earnings as elevated raw material prices weighed on margins. 

Separately, MRF's board declared an interim dividend of ₹3 per share, representing 30% of the face value of ₹10 each, for the financial year ending March 31, 2027. 

Shares of MRF closed at ₹1,25,070.85 on the BSE on Monday, down 1.29%.