Relaxo Footwears declines after Q2 PAT falls 9% YoY; margins contract 569 bps YoY

Relaxo Footwears lost 2.34% and traded at Rs 1309.25 after the footwear maker posted a 9% decline in net profit to Rs 69 crore in Q2 FY22 from Rs 75 crore recorded in Q2 FY21.

Revenue from operations grew 24% year on year to Rs 714 crore in Q2 FY22 from Rs 576 crore reported in the same period last year. Profit before tax declined by 8.4% to Rs 91.94 crore in Q2 FY22 over Q2 FY21.

EBITDA fell by 8% to Rs 117 crore in Q2 FY22 from Rs 127 crore in the same quarter last year. EBITDA margin deteriorated by 569 basis points to 16.4% in Q2 FY22 from 22% in Q2 FY21.

Relaxo said EBITDA decreased mainly due to steep increase in raw material prices, enhancement of marketing, brand promotion and other administrative expenses as compared to corresponding period of last year, wherein raw material prices were extremely low.

Commenting on the result, Ramesh Kumar Dua, MD of the company said, Relaxo registered good growth in revenue on the back of demand recovery due to opening of the stores across geographies, strong rebound in economic activities resulting in business returning to pre-covid levels. Inflationary trend in the raw material prices has further intensified and has reached elevated levels which impacted gross margins. However, we have concern about the increasing trend in raw material prices and taking all possible measures to mitigate its impact on margins including timely price increase. We are firmly and resolutely on a journey to accelerate our growth further by using a diverse portfolio, enhanced distribution network & deployment of resources in innovation, brand promotion and continuing to follow customer centric approach.

Relaxo Footwears is engaged in production of Hawaii slippers, light weight slippers, canvas shoes, PVC footwear etc.

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