Ceat Q3 profit grows 27% to ₹132 crore on strong demand in replacement market

The tyre industry is facing a robust demand, led by a strong demand in the replacement market, and growth in the last quarter of this fiscal year will also be largely driven by replacement demand, said Kumar Subbiah, CFO, Ceat Tyres.

“In the past nine months, we have already grown on topline versus the same period of last year despite having a not-so-good quarter one. In Q2, we had grown over the same quarter of last year by about 14 per cent. In Q3, we have grown over the same quarter of last year by about 27 per cent. In Q4, we expect the demand to be good in most of the categories, though OEM demand for some categories has come down a bit after the festival season. Growth should largely be driven by the replacement market, followed by OEMs,” Subbiah told BusinessLine.

Around 60 per cent of Ceat’s revenue comes from the replacement market, around 30-35 per cent from OEMs and 15 per cent from exports.

RPG Group’s Ceat Ltd on Tuesday posted a consolidated net profit of ₹132.34 crore in the third quarter ended December 31, 2020, a 27.35 per cent fall compared to the previous quarter of the current fiscal year. It had posted a consolidated net profit of ₹182.18 crore in the second quarter of this fiscal year. Ceat Ltd posted ₹2,221.25 crore as revenue from operations during the quarter under review, a 12.27 per cent increase compared to the second quarter of this year, when it had posted ₹1,978.47 crore.

On a year-on-year basis, the consolidated net profit in the December quarter increased by 152.07 per cent compared to the year-ago quarter’s ₹52.5 crore. The revenue from operations in the quarter also increased year-on-year by 26.08 per cent, compared to the year-ago quarter’s ₹1,761.77 crore.

Capacity additions

Ceat has been adding capacity at its plants in Halol, Chennai and Nagpur over the past one and a half years. This capacity expansion involved a capital expenditure of ₹3,500 crore, said Subbiah. Ceat has also invested in a plant in Ambernath, which will focus on speciality tyres, and is exclusively meant for exports.

The company will be focussing on exports to the North American and European markets. “Our presence is improving in Europe. In North America, we are working towards improving our presence. These two are the focus markets for speciality tyres,” said Subbiah.

There have been many queries from countries that are looking to de-risk from China on whether India could start locally producing and supplying tyres to them, he said, adding that India is in a great position to take advantage of this, he said.

Passenger segment

Going forward, Ceat’s primary focus will be on catering to the passenger vehicle segment, he said. “As a company, our primary focus is on the passenger segment, which is predominantly passenger car tyres and two-wheeler tyres. If you look at our investments in the factories in Nagpur and Chennai, these are fully directed into the passenger segment,” he said.

The company had initially planned capital expenditure of ₹800-900 crore for this fiscal year, which had to be reduced to ₹550-600 crore because of the pandemic and the resultant slowdown.

“Now that there is some traction, and the demand is picking up, for the next financial year, we will be spending more than our earlier estimates,” said Subbiah.