Are West Coast Paper latest results good or bad?

West Coast Paper Mills reported its Q2 FY26 results, which highlight significant operational challenges. The company recorded net sales of ₹1,043 crores, reflecting a marginal decline of 0.17% year-on-year, although there was a sequential growth of 9.26% compared to the previous quarter. However, the net profit for the quarter plummeted to ₹17.49 crores, marking an 80.37% decline year-on-year and a 67.84% decrease from the prior quarter.
The operating margin fell to 6.52%, down 708 basis points from the previous year, indicating the lowest level of profitability in recent history. This margin compression is attributed to rising input costs and competitive pressures that have hindered the company's ability to pass costs onto customers. Furthermore, the reliance on non-operating income has become concerning, constituting 119.39% of profit before tax, suggesting that core operations are struggling to generate sustainable profits.

The company's return on capital employed (ROCE) has also sharply declined to 7.34%, significantly below its five-year average of 34.48%, indicating deteriorating capital efficiency. Additionally, the financial results reflect a mixed picture regarding balance sheet health, with a net cash position but increasing long-term debt.

In light of these results, West Coast Paper Mills experienced an adjustment in its evaluation, reflecting the underlying operational distress and challenges faced by the company. Overall, the financial data indicates a critical juncture for West Coast Paper Mills, necessitating strategic measures to address the declining profitability and operational efficiency.