Are Natl.Fertilizer latest results good or bad?

National Fertilizers has reported its financial results for Q2 FY26, highlighting significant operational challenges despite a notable increase in revenue. The company achieved consolidated net sales of ₹6,763.07 crores, reflecting a year-on-year growth of 54.04% and a substantial sequential increase of 91.36%. This surge in revenue is attributed to heightened demand during the kharif season and improved realisations.
However, the financial performance reveals a stark contrast when it comes to profitability. The consolidated net profit for the quarter was a loss of ₹35.81 crores, marking a dramatic decline of 396.69% compared to a profit of ₹12.07 crores in the same quarter last year. This indicates a significant struggle to convert revenue growth into bottom-line profitability. The operating margin, excluding other income, contracted to 1.90%, down from 2.85% in the previous year, further underscoring the company's operational inefficiencies.

The return on equity (ROE) stood at 6.77%, which is below industry standards, indicating challenges in generating adequate returns from capital employed. The return on capital employed (ROCE) was also concerning, with a latest figure of 5.10%, suggesting structural inefficiencies in asset utilization. Additionally, the company's working capital appears strained, as evidenced by a declining debtors turnover ratio.

Overall, National Fertilizers is facing critical operational challenges, characterized by persistent losses and declining margins, which raise questions about its competitive positioning in the fertiliser sector. The company has seen an adjustment in its evaluation, reflecting these deteriorating fundamentals. Investors should closely monitor future results for any signs of improvement in profitability and operational efficiency.