The Hindu Business Line : ‘Margins for tyre manufacturing sector may come down in 2008-09’

Kolkata, March 16 Unless there is a dramatic revision in prices of crude oil and natural rubber, the margins for tyre manufacturing sector may come down in 2008-09, according to Mr Paras Chowdhury, Managing Director of Ceat Ltd.

“The tyre sector is facing tremendous cost push. Considering the overall economic situation it might not be easy to pass on this burden in entirety, on the consumers in the coming months. Accordingly, margins may come down in the next fiscal especially in the April-June 2008 quarter,” Mr Chowdhury told Business Line.

He, however, added that a decline in crude oil prices might improve the situation.

On the performance of Ceat in the January-March 2008 quarter, he said that a view on the same could not be taken at this juncture. “March sales traditionally plays a significant role in the performance of the tyre companies,” he said.

Industry sources, however, told Business Line that despite a slowdown in the commercial vehicle segment, the company was expecting to remain on the growth path in the fourth quarter of 2007-08 compared to the corresponding period of the previous fiscal.

It may be mentioned that following a robust fourth quarter of 2006-07, the tyre sector registered a drop in OE requirement from the heavy and medium commercial vehicle manufacturing sector beginning April-May 2008.

The impact of the slowdown in the HCV and MCV segment during the current fiscal was, however, minimised by strong growth in demand for off-the-road and passenger car tyres. Despite a drop in OE demand, replacement market for the two-wheeler tyres grew substantially during the year.

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