PK Chowdhary, Managing Director of Ceat says that margins were under pressure in Q4FY10 due to high rubber prices. He feels that the margins in Q1 will continue to be under pressure. He further says that the company has not been able to pass on the higher rubber costs to consumers.
“The company will hike tyre prices by 3.5% on May 1.” Chowdhary says adding that original equipment manufacturers (OEMs) have agreed to absorb the hike in prices. The company will need price increase of atleast 15% to get back to healthy margins.
The company gives guidance of 38% growth in topline next year. Demand boost is from replacement market, exports and OEM, he adds.
Here is a verbatim transcript of an exclusive interview with PK Chowdhary on CNBC-TV18. Also watch the accompanying video.
Q: What the margin picture in Q4? Were they under pressure because of escalating rubber prices?
A: Margin was under pressure as rubber prices have been going very high and the resultant effect was that our profit before tax (PBT) came down to Rs 21.5 crore in Q4. For the full year, the PBT was at a very smart level of Rs 239 crore, but for the quarter it was low.
Q: What is the sequential slip been in your PBT quarter on quarter? What kinds of revenues have you booked for Q4?
A: In the Q1 and Q2 our PBT to net sale margin was close to about 12%. It slipped to around 4.5% in Q3 and now it has slipped to 2.9%. So there has been a slippage in Q3 and Q4. We expect this situation to remain for some more time because rubber prices continue to rule very high and we are not able to pass on fully to the extent of cost push to the customers.
The result is that the profit margins are under pressure and this situation is likely to prevail in Q1. On an overall basis, the margin for the whole year stood at a very smart level of 8% which was all time best for our company. Our profit also after tax of Rs 161 crore has been the highest ever that we met.
(moneycontrol.com)
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