Garware Hi-Tech Navigates Q1 FY26 Amid US Tariffs & Monsoon 🌧️
Hey there, finance friends! 👋 Let’s dive into Garware Hi-Tech Films Limited’s (GRWRHITECH) performance for the quarter ended June 30, 2025 (Q1 FY26), as shared in their recent earnings conference call.
The company navigated a challenging period marked by the unpredictable dual forces of escalating US tariffs and an earlier-than-expected monsoon season. Despite these headwinds, Garware Hi-Tech managed to post a consolidated revenue of INR 495 crores, a respectable 4.3% increase from INR 475 crores in Q1 FY25.
However, the profitability picture saw some pressure. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at INR 123 crores, down from INR 130 crores last year, pushing the EBITDA margin to 24.8% from 27.4%. This dip, the company clarified, was primarily due to strategic investments in increased employee and marketing costs, aimed at long-term growth. Profit Before Tax (PBT) also saw a 6.1% decline to INR 110.3 crores, with Profit After Tax (PAT) settling at INR 83 crores.
Segment Deep Dive:
- Paint Protection Films (PPF) 🚗: This segment was the shining star, recording approximately 28% year-on-year growth. Higher adoption in global markets like North America and the Middle East, along with expanded Garware Application Studios, fueled this robust performance. India’s PPF business also mirrored this success, growing 25-30%.
- SunControl Films ☀️: Revenue here saw about a 7% decline. This was largely attributed to the early onset of monsoons, which dampened demand in the automotive sector, coupled with sluggish growth in developed markets.
- Industrial Products (Shrink Films) 📦: Overall, this division saw a 3% decline, with the shrink films sub-segment particularly hit by nearly 29%. The unusual monsoon patterns impacted the beverage industry, a key user of shrink films, and ongoing uncertainties around US tariffs added to the pressure. The company estimates the early monsoon alone impacted revenue by INR 25-30 crores, primarily in the shrink business.
The US Tariff Tangle:
Garware Hi-Tech Films highlighted a significant challenge from evolving US tariffs. Initially, a 6.25% tariff was in place until April 2025. Post-April, a 10% base tariff was added, raising the total to 16.25%. The company noted that this initial increase, which could have meant an INR 33 crore impact on Q1 profitability, was largely absorbed through various supply chain efforts. However, a fresh additional 15% tariff imposed from August 7th, bringing the total impact to 31.25% for new shipments, presents a more difficult situation.
The company is actively evaluating its next steps and engaging with channel partners for solutions. They are focused on cost-saving measures, improving operational efficiencies, and reducing power costs to mitigate the impact. It’s a dynamic situation, and Garware acknowledged that absorbing such high tariffs indefinitely would be challenging.
Strategic Growth & Geographical Shifts:
To counter the tariff impacts and drive growth, Garware is aggressively expanding into alternative geographies:
- Middle East: Seeing rapid growth, with a target of 30-40% this year, especially in the Architectural segment. Increased manpower and digital marketing are key drivers.
- Europe: An established market targeted for around 20% growth, with new manpower already in place.
- India (Garware Application Studios): The company’s franchisee model for PPF and SunControl is a significant growth engine. With over 250 studios currently, they aim to reach 300 by March 31, 2026. These studios benefit from unique product offerings (like Titanium PPF), kits, and financial benefits, yielding 10-15% better margins than traditional distribution channels.
Due to the ongoing tariff uncertainties, the company has decided to withdraw its previous FY26 revenue guidance of INR 2,500 crores, as the situation remains highly volatile and beyond their immediate control.
Despite the external pressures, Garware Hi-Tech Films remains in a strong financial position, being debt-free with over INR 700 crores in cash and equivalents, providing ample liquidity for ongoing capital expenditure initiatives and potential strategic investments, including a second PPF line and an upcoming TPU plant. They remain committed to protecting investor interests and navigating these challenges with agility. You can learn more about Garware Hi-Tech Films and their business here.
Stay tuned for more updates as this dynamic landscape unfolds! 📈
source: Corporate Announcement
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