Gujarat Alkalies slides 5% on dismal quarterly earnings

Gujarat Alkalies’ weak quarterly earnings was aligned with the trend across the chemicals sectors as it struggles with unwinding of high-cost inventories and sluggish demand.

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Shares of Gujarat Alkalies and Chemicals slumped 5 percent in early trade on August 9, a day after the company posted a dismal set of earnings for the April-June quarter.

Aligned with the weak earnings trend seen across the chemicals sector, Gujarat Alkalies also reported a net loss of Rs 57.20 crore for the June quarter. In stark contrast, the chemicals player had recorded a net profit of Rs 190.90 crore in the same period of the preceding fiscal.

Revenues also dropped 19.1 percent to Rs 912.80 crore, down from Rs 1,128 crore clocked a year ago. The company also attributed the weak topline and bottomline to the aggressive competition and the volatile market conditions prevailing during the quarter under review.

“The sharp decline in profit is mainly on account of overall adverse market
condition of the caustic-chlorine industry leading to a substantial reduction in price in both domestic and international markets,” the company stated in an exchange filing.

At 9.52am, shares of Gujarat Alkalies were trading 3.59 percent lower at Rs 638.40 on the National Stock Exchange.

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The volatile market conditions also weighed on the company’s operational performance as its EBITDA margin too steeply fell to 6 percent in Q1 as against 33.8 percent in the same quarter last year.

An unwinding of high-cost inventory, and a fall in prices due to an increase in supply from Chinese companies have rocked the chemicals industry in the first quarter of FY24. Demand trends also reflect sluggishness in both domestic and export markets, however, analysts anticipate it to recover from the second half of the current fiscal.

In addition, a high base of last year has also been another major factor, resulting in the sharply weak quarterly results delivered by chemical companies in the June quarter. Most chemical companies have reported a sharp fall in their earnings for the quarter that ended in June.

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