JK Tyre & Industries posted a nearly 3.4 times rise in consolidated net profit to Rs 55.26 crore in the April-June quarter against the same period last year, riding primarily on a profitability boost at its Mexican operations, JK Tornel.
On a standalone basis, profit grew 40 per cent to Rs 35 crore on approximately 4 per cent rise in turnover.
According to a company announcement on Wednesday, Mexican operations doubled the gross profit margin on sales from 7 per cent to 15 per cent in the last quarter. JK Tyre had acquired Tornel in 2008.
In comparison, the Indian operations, handling two-thirds of JK’s consolidated installed capacity of 2 crore tyres a year, reported improvement in margins from 7 to 9 per cent.
According to Arun K. Bajoria, President and Director of JK Tyre, the company’s consistent attempts to improve the quality of Tornel’s products has paid off as the Mexican operations, which had been a replacement market player, now entered the league of OE suppliers. “JK Tornel is now supplying passenger car radials to Nissan, Chrysler and Volkswagen,” Bajoria said.
Tornel currently has a capacity to manufacture 66 lakh tyres, from three plants in Mexico, equally distributed between truck-bus BIAS (nylon) and passenger car radials. Apart from domestic sales, it is also an exporter to other South American countries and parts of North America.
To tap further growth, JK is now investing $22 million to expand its passenger car radial manufacturing capacity by nearly 25 per cent from 36 lakh to 45 lakh tyres a year.
Bajoria said the company’s Rs 150 crore radial tyre capacity expansion in Chennai, from 25 lakh to 30 lakh a year, will be over in six months. Apart from car radials, the plant also has a capacity to manufacture 4 lakh truck-bus radials.
Hit by a 20-25 per cent OE off-take during April-July, JK is currently utilising 75 per cent of the installed capacity in its Indian operations.
Bajoria, however, insisted that the company would continue expanding capacities, especially that of truck-bus radials, to cash in on the future surge in demand. He is particularly bullish on increasing conversion from nylon to radials in the heavy commercial vehicles segment.
“The radialisation currently stands at 23 per cent. We expect it to be near 50 per cent in two years,” Bajoria said.
The JK Tyre stock closed at Rs 92.25, down 0.16 per cent, on the BSE on Wednesday.