The Hindu Business Line : Truck sales slowdown may not impact tyre cos in Q1

Kolkata June 15 The slowdown in heavy and medium commercial vehicles sales is unlikely to leave much impact on the performance of the tyre manufacturers in the first quarter of this fiscal.

Industry sources said all major tyre producers (including Apollo Tyres, MRF, JK Tyre, Ceat and Birla Tyre) have reported rise in net realisation during April-June 2007 compared to the corresponding period in 2006-07.

This is primarily due to the twin impact of diversion of more truck, bus tyres towards the replacement market due to fall in OE (original equipment) requirement that too at a time when the replacement demand was very high.

Replacement demand for truck-bus tyres remains at its peak during the summer months between March and June.

The gains were further capitalised by a rise in production during the period.

Production up

According to sources, Apollo Tyres - the largest commercial vehicle tyre manufacturer - has reported 12-15 per cent rise in production. Ceat has also ramped up production.

The returns have further boost up due to a comfortable cost scenario compared to the last fiscal. Natural rubber - which is the major ingredient of tyre - is now ruling at Rs 82 a kg roughly 25 per cent lower than the prices at the corresponding period last year.

Natural rubber prices were on fire during the first quarter last year leading to frequent price increases by the tyre makers.

Prices of imported tyre chemicals - which are directly related to crude prices - are also ruling at comfortable range compared to last year due to appreciation of rupee beginning March 5. Rupee is now ruling at Rs 40.83 from as high as Rs 44.

The net impact of rupee appreciation, however, will depend on the export turnover of the particular company. Companies such as JK Tyre for example will have minimal impact on this count as its import and export turnover is more or less identical.

"Overall we are enjoying the fruits of more sales in the replacement market when the input cost are comparatively lower. Since the commercial vehicles replace tyres twice a year, we have received the full impact of the price rises effected during the first and second quarter of the last year," said a senior official in a major tyre company.

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