The Hindu Business Line : Falcon Tyres posts 50% drop in Q4 net

Kolkata. June 28 Falcon Tyres today reported 50 per cent drop in net profit to Rs 67 lakh in the fourth quarter of 2006-07 compared to Rs 1.35 crore during the corresponding period of 2005-06.

Gross sales, however, moved up approximately 12 per cent from Rs 68 crore to Rs 76 crore. Operating profit for the quarter increased by 20 per cent from Rs 2.97 crore to Rs 3.59 crore and profit before tax increased by 17 per cent from Rs 1.7 crore to Rs 2 crore.

The drop in net profit was primarily attributed to Rs 1.24 crore deferred tax paid by the company during the quarter as against a receivable of Rs 31 lakh during the corresponding period in the previous fiscal.

Provision for interest has also increased by 57 per cent to Rs 88 lakh (Rs 56 lakh) during the quarter.

The net profit for the entire year, however, moved up by 12 per cent from Rs 3.51 crore to Rs 3.96 crore. The company directors have recommended a higher dividend of 30 per cent for the last fiscal. The company paid a dividend of 25 per cent for 2005-06.

Gross sales for the entire 2006-07 has increased by 25 per cent from Rs 255 crore to Rs 321 crore. Operating profit went up by 30 per cent from Rs 9.58 crore in 2005-06 to Rs 12.52 crore.

According to a company press release, Falcon is currently implementing a Rs 70-crore capacity augmentation and modernisation programme at its Mysore facility. Following completion of the programme by the end of the second quarter of this fiscal, the company will be producing 7.5 lakh tyres a month from the current level of 6 lakh tyres a month.

Commenting on the results, the Ruia Group Chairman, Mr Pawan Kumar Ruia, said: “Falcon is in the process of broadening its product range. The company has already signed a ‘Technical Aid Agreement’ with Sumitomo Rubber Industries of Japan for providing technical know-how for two-wheeler tyres. The agreement encompasses total gamut of product upgradation, process improvement, introduction of tubeless tyre and other new generation products.”

Mr Ruia however expressed concern at the sluggish growth of demand from the two-wheeler manufacturing sector. “The company will have to shift its focus gradually from the OEMs to the replacement segment,” he said.

Mr Ruia also expressed concern at the steep increase of interest cost affecting the bottomline of the company.