MRF to hike prices afresh as input costs surge

MRF is likely to further hike its tyre prices after an around 8 per cent increase last July.

"Raw material prices have never skyrocketed so much. All tyre companies are reeling under its pressure. In a competitive environment we cannot pass on price increases to the customer," said Philip Eapen, executive director, marketing, MRF.

He did not get into specifics as to whether the price increase will be in the replacement market or in the original equipment manufacturer category or both.

Another tyre manufacturer Apollo Tyres had hiked product prices by 3-4 per cent with effect from April 1, 2005.

MRF expects the continued rising input costs to put a squeeze on its profits this year as well, even as it continues to face stiff competition to maintain top line margins.

The company's net profit had plummeted by 75.46 per cent to Rs 28.80 crore for the year ended September, 2004 compared with Rs 117.38 crore recorded in the same period last year.

Costs of inputs such as natural rubber and oil based by-products, which constitute up to 70 per of manufacturing costs, saw a steady increase last year.

MRF has unlocked a slew of initiatives aimed at controlling spiralling input costs. "We have continously looked at containing costs, that's why we have did not increase prices to the fullest extent. These initiatives are mostly process driven and a few are R&D-related," added Eapen.

Commenting on growth for the overall domestic tyre industry, Eapen remarked that truck tyres are expected to have a flat growth trajectory or even witness a slightly negative growth, motorcycle tyres to grow at 8-10 per cent and the passenger car industry to grow at 5-6 per cent.

MRF plans to increase exports, which stood at Rs 351.18 crore last fiscal, by 10 per cent this year. The company currently exports to about 65 countries.