InvestorQ : Why did Finolex Cables report a fall in profit in the Sep-20 second quarter?
Lavanya Subramanian made post

Why did Finolex Cables report a fall in profit in the Sep-20 second quarter?

Anamika Sodhani answered.
6 months ago

Finolex Cables makes electrical and telecom cables and caters largely to the industrial sector in India. For the latest Sep-20 quarter, Finolex Cables reported 10.7% lower Sep-20 quarter sales revenues at Rs.640 crore, largely on the back of the COVID demand effect.

It may be recollected that Finolex Cables services the electrical cables segment predominantly and their business demand is largely industrial or at least institutional in nature. That explains the sharp fall in top line and bottom line in Jun-20 quarter as there was a gap before industrial output could get back to normal.

For the Sep-20 quarter, the operating profits were down 6.46% at Rs81.57cr. However, the operating margin or OPM was marginally higher moving from 12.18% in the Sep-19 quarter to 12.76% in the Sep-20 quarter on the back of a lower sales base.

PAT for the Sep-20 quarter was down 19.3% at Rs.102 crore. This is more because of post operating appropriations in this quarter. This resulted in PAT margins contracting from 17.72% to 16.01% in Q2 on a yoy basis in the Sep-20 quarter.

There is a unique feature about the electrical cables of Finolex Cables. The principal product of Finolex Cables, which is electrical cables, accounts for 67% of the revenues of Finolex Cables but a huge 95% of the EBIT profits of the company. That means; the impact of COVID on industrial demand hurt the company and the effect actually got multiplied manifold.