Here are five major reasons that triggered the sharp fall in Astral’s shares:
Sharp Fall In Profitability
Astral’s net profit declined by 33% from the year-ago period to ₹79 crore. Weak operating performance during the quarter also impacted the profitability.
Weak Operating Performance
Astral’s EBITDA margin declined by nearly 200 basis points from the year-ago period to 13.6%. On a sequential basis, the fall in margins exceeded 400 basis points.
The margin performance during the quarter was impacted by lower margins in both the core plumbing business, where margins fell 150 basis points from the year-ago period, whereas the adhesives and paints business margins fell 280 basis points from last year.
Core Business Underperforms
Astral’s core business, the plumbing division was the major drag during the quarter. Despite resilient volumes, the revenue for the business declined by nearly 6% from last year. The plumbing business contributes 70% of Astral’s overall topline.
PVC Price Volatility
PVC prices have remained volatile all through the June quarter, declining by 14% on a year-on-year basis, and between 4% and 5% for the June quarter.This drop in PVC prices led to inventory losses and weaker realisations, which impacted the overall performance of the company.
However, the management has highlighted that PVC prices have been settling down since the beginning of the September quarter.
Demand Dampener
The polymer industry witnessed weak demand during the quarter, that had an impact on Astral’s performance. The management though, is optimistic on the road ahead, stating that starting July, demand has seen improvement.
Shares of Astral are trading 8% lower on Tuesday at ₹1,270.9. With today’s fall, Astral has taken its losses on a year-to-date basis to 23%.
(Edited by : Fatacia on the wall)
