Finolex Industries faces profit decline despite resilient volume growth in Q3 FY25

Finolex Industries Limited, one of India‘s leading manufacturers in the PVC pipes market, reported a mixed financial performance for the third quarter and the nine-month period ending 31 December 2024. While the company showcased strong volume growth resilience in key segments, financial metrics reflected a decline due to weaker realisations and subdued demand across domestic markets. Despite headwinds, the company’s efforts to diversify beyond agricultural applications seem to be yielding modest gains in volume expansion.

How did Finolex Industries perform financially in Q3 FY25?

Finolex Industries’ financial results for the third quarter of FY25 highlighted both resilience and challenges. The company’s total income from operations dipped slightly to ₹1,001.24 crore, representing a 1.8% decrease compared to ₹1,019.69 crore during the same period last year. This decline reflects broader market weaknesses, particularly within the construction and agriculture sectors, where demand for PVC products has been inconsistent due to fluctuating commodity prices and muted economic activities.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) witnessed a sharp decline of 30.4%, dropping to ₹83.43 crore from ₹119.90 crore in Q3 FY24. The EBITDA margin narrowed to 8.3% from the previous year’s 11.8%, indicating squeezed profitability amidst rising input costs and reduced price realisations. Additionally, the company’s profit before tax (PBT) fell by 21.1% to ₹94.53 crore, while profit after tax (PAT) stood at ₹70.96 crore, marking a 20.5% decline compared to the previous year.

Despite these financial pressures, Finolex Industries demonstrated robust volume growth resilience, particularly in the Pipes and Fittings segment, where sales increased by 5.5% to 85,767 metric tonnes (MT) from 81,312 MT in Q3 FY24. The PVC Resin segment also showed a remarkable 29.9% growth, with volumes rising to 56,830 MT from 43,737 MT. This growth highlights the company’s strategic focus on operational efficiencies and market expansion beyond its traditional agricultural base.

What drove Finolex Industries’ nine-month performance in FY25?

For the nine-month period ending December 2024, Finolex Industries reported total revenue of ₹2,970.16 crore, down 3.6% from ₹3,082.01 crore in the corresponding period last year. This decline is largely attributed to weaker pricing dynamics in the PVC pipes market, despite stable demand in certain non-agricultural sectors. The company’s EBITDA decreased by 19.7% to ₹301.83 crore, reflecting continued margin pressures, while the EBITDA margin contracted from 12.2% to 10.2%.

Interestingly, the company’s PAT surged to ₹627.60 crore, more than doubling from ₹293.87 crore in the previous fiscal period. This substantial increase is primarily due to an exceptional gain of ₹416.99 crore, which provided a one-off boost to the bottom line. Excluding this exceptional item, profitability remained under pressure due to rising operational costs and weaker realisations.

Volume growth remained a bright spot. The Pipes and Fittings segment posted a 3.9% increase in sales volume, reaching 245,729 MT compared to 236,406 MT in the previous year. The PVC Resin segment grew significantly by 30.9%, with volumes climbing to 166,690 MT from 127,327 MT. These figures underscore the company’s strategic efforts to penetrate non-traditional markets, diversify its product offerings, and improve supply chain efficiencies.

What are the key factors influencing Finolex Industries’ performance?

According to Prakash P. Chhabria, Executive Chairman of Finolex Industries Limited, the company’s modest volume growth reflects its ability to navigate challenging market conditions. “Finolex Industries has registered modest volume growth in the Pipes and Fittings segment despite a weak demand scenario. The operating performance remains muted mainly due to weaker realisations. However, our continuous efforts to penetrate the non-agricultural segment are ongoing,” he stated.

The Indian PVC pipes market has faced significant volatility due to fluctuating raw material costs, particularly for polyvinyl chloride (PVC) resin, which is sensitive to global crude oil prices. Additionally, sluggish demand in the agricultural sector, driven by irregular monsoon patterns and reduced government spending on rural infrastructure, has further pressured the company’s core markets.

However, Finolex’s strategic shift towards non-agricultural segments, such as residential plumbing, industrial applications, and infrastructure projects, has helped cushion some of these impacts. The company’s diversified product portfolio, strong distribution network, and emphasis on quality continue to support its long-term growth trajectory, even as short-term challenges persist.

What is the future outlook for Finolex Industries in the PVC pipes market?

Looking ahead, Finolex Industries aims to capitalise on opportunities in non-agricultural sectors, which are expected to drive demand for high-quality pipes and fittings amid India’s ongoing urbanisation and infrastructure development. The company’s focus on operational efficiency, supply chain optimisation, and product innovation will be critical in sustaining volume growth resilience and improving profitability.

While the near-term outlook remains uncertain due to macroeconomic headwinds, including fluctuating commodity prices and global economic instability, Finolex’s strong brand equity, robust manufacturing capabilities, and strategic market positioning provide a solid foundation for future growth.

Experts believe that as the Indian economy stabilises and government investments in infrastructure projects increase, demand for PVC products will likely rebound. Finolex’s proactive approach to market diversification and cost management will be key to navigating this evolving landscape.