Ceat has declared its third quarter results. Its Q3 net profit was at Rs 5 crore versus Rs 24 crore. Its net sales were at Rs 887 crore versus Rs 710 crore. The company's raw material cost was at Rs 648 crore versus Rs 465 crore, reports CNBC-TV18.
Anant Goenka, Dy MD, Ceat, in an exclusive interview on CNBC-TV18, said that his company has taken a price hike of 1.5%. At present, rubber prices are at Rs 235 per kg in the domestic market while internationally, they are Rs 20 higher than the domestic price.
The company, along with many other players in the tyre industry has found it difficult to pass on the price hike to the consumer in the last three months. However, the price hike, while it will not offset the raw material pressure, it will add stress on the margins going ahead.
Below is a verbatim transcript of his interview with CNBC-TV18’s Sonia Shenoy and Gautam Broker. Also watch the accompanying video for more.
Q: Take us through the numbers this time around - it has gone horribly wrong for most of the tyre makers because of the way rubber is surging. How has the bottomline and the margins looked like this quarter?
A: Yes. We recorded a net sale of Rs 887 crore in Q3 and an operating profit of about Rs 15 crore. After some VRS and exceptional expenses our PBT was about Rs 7.5 crore. Our operating PBT to net sale margin was about 1.7% against 4.7% in the same time last year. Overall we have recorded a good growth of about 24% versus last year.
Q: What will you be doing in terms of margins in FY11 and in the first couple of quarters of FY12 because most of the other tyre makers have said that it is difficult to pass on so much of a hike in rubber cost on to the consumer?
A: That is right. It has been a little difficult in the past three months to pass on the price increase. We are looking at some price increases in the coming time. We have also given a small price increase in January as well. We expect some amount of price increase but it will not offset the raw material price increase that has happened in the past 12 months.
There will be further pressure in margins for the coming three-four months. Through operational efficiencies and further price increases, after about three months, we hope to offset some amount of this price pressure.
Q: What is the exact number of the operating profit margin this quarter?
A: 1.7%.
Q: You are also looking to monetise your land at Bhandup. Anything going forward on that?
A: We have still not taken a call on that yet because we still have to set up a new plant eventually if we were to move Bhandup. Bhandup is our largest plant – nearly doing half of our production. It would take at least a year-and-half for a new plant to come up. Only then can we look at moving out of Bhandup.
Q: Have you firmed up plans to move the plant away from Bhandup in the near future?
A: We are still discussing that and we are still taking a call on that. I would say it is still about a year-and-half away before any of that can happen.
Q: Where are rubber prices headed because currently at about Rs 235 per kg this is something that no analyst and no tyre maker had ever assumed that would take place because of primarily what has happening in Thailand. What are your estimates of where rubber prices would head and in terms of margins, how much do you think it could slip to?
A: Times are looking difficult for the industry. There is a gap in the international and domestic prices even now. In India, rubber prices are at around Rs 235 ex-cochin. Internationally, prices are still about Rs 20 higher. I do not expect any slowdown in rubber prices right now.
In fact, there is likely to be some convergence with international rubber prices in the coming months. Margins will continue to be under pressure and rubber prices will keep going up.
Q: Up until now, what is the quantum of price hike that has taken so far?
A: We have withdrawn about 1.5% of discount that we were giving. It is about 1.5% price increase.
Q: Any policy support that you see helping you? Do you expect any moves from the government to help the tyre industry?
A: The government has taken a couple of measures of giving duty free import of about 40,000 tonne of rubber as well as changed the duty structure to about Rs 20 per kg on rubber as well.
Currently, that is not having any impact on us in the short-term because international prices are higher right now. But once Indian prices go higher if and when that happens, we will see some benefit of that government change or that change in the policy in the coming times.
(Source: http://indiaearnings.moneycontrol.com/sub_india/compnews.php?autono=516001)
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