Higher input costs drag Tube Investments Q2 profit 18%

Rise in input costs and a lower offtake by the auto industry pulled down the profits of Tube Investments of India (TI).

While standalone sales for the second quarter was up nine per cent at Rs 925 crore (year on year), net profit was down 18 per cent to Rs 37 crore.

The bicycles division registered an 18 per cent growth in revenue. The margins continued to be under pressure due to inability to pass on the cost increases fully in a competitive environment, said the company in a release.

The engineering division grew seven per cent despite the negative growth in the auto industry, said the release. Lower offtake in the passenger car segment and delay in the release of further orders for railway wagons resulted in a decline of one per cent in the revenues of the metal formed products division. There was a marginal revenue growth in chains.

“The margins were under pressure across all segments due to increase in power and fuel costs, inflation coupled with lower offtake,” said L. Ramkumar, Managing Director.

The company has acquired 44.12 per cent stake in Shanthi Gears Ltd (SGL) from its former promoters for Rs 292 crore.

Consequently, the company has made an open offer to the shareholders of Shanthi Gears to acquire up to 2.12 crore equity shares, representing 26 per cent of SGL’s share capital.

Shanthi Gears’ second quarter net profit has slipped to Rs 5.72 crore, from Rs 7.12 crore in the corresponding quarter last year. TI is not worried about this, given “the overall market itself if not favourable,” said Ramkumar.

Tube Investments is setting up a hydraulic cylinder facility for non-auto projects near Chennai. This is expected to start operations in nine months, said Ramkumar. It is also looking at a bicycle facility in the North or East.