The Hindu Business Line : Falcon Tyres plans another hike in prices

Kolkata, Aug. 19 On the heels of a 14-15 per cent increase in prices in both OE (original equipment) and replacement segments in early August, Falcon Tyres is planning to enhance prices by another 10-25 per cent latest by next month to keep pace with the cost push.

“We have to increase prices in next couple of weeks to maintain profitability,” Mr P.K. Ruia, told newspersons here today.

“Phenomenal increase in cost of production - especially that of natural rubber and rubber chemicals - had eroded our margins to the extent that we were selling a number of products below the cost prices. While we have increased the prices once this month, another price increase up to 20-25 per cent is imminent to maintain positive margin on the entire product range,” he added.

Falcon reported 58 per cent drop in its net profit to Rs. 54 lakh during the first quarter of this fiscal compared to the corresponding period of 2007-08. In a clear indication of the pressure on margins, net profit has dropped irrespective of a 69 per cent growth in net sales to Rs. 142 crore.

Mr. Ruia, however, maintained that the profit outlook of the net quarter was not worse than the first quarter results. “Two and three wheelers sales picked up beginning end may generate robust demand for Falcon products. However, the sharp rise in raw material cost continued to be a cause of concern”, he said.

Addressing Falcon’s concerns major OE buyers have agreed to enhance prices.

“We have already effected a 15 per cent prise for supplies to Bajaj in July another hike of eight per cent is scheduled to take place in September.

“We are hopeful of tiding over the crisis riding on stringent cost cutting measures as well as a significant positive impact on the bottomline by the recently commissioned captive co-generation plant at Falcon’s Mysore facility,” Mr. Ruia said.

Apart from meeting the captive requirement of 4-4.5 mw, Falcon is planning to feed of the excess power produced by the dual fuel (coal and rice husk) plant to the state grid at a lucrative price of Rs 6 per unit.

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