A steep rise in raw material costs has brought down RPG Group company and tyre maker, Ceat's net profit in the second quarter of FY 11 to Rs 15.27 crore.
The profit of the company for July-September quarter stood at Rs 61.47 crore in the year-ago period.
"Raw materials costs is a major concern and the main reason for our lower net profit in Q2 FY 11. They are up 40 per cent as compared to the same period last year," Ceat's Deputy Managing Director Anand Goenka told PTI here today.
Rubber, an important raw material, today costs Rs 187 per kilogram compared to Rs 90-100 per kilogram in the same period last year. "Rubber price has risen by nearly 100 per cent," Goenka said.
The Ceat official said that last year was an "abnormal one for the tyre industry" as raw materials prices had declined steeply due to the global economic downturn while the tyre market remained strong.
The company clocked a net sales of Rs 831.65 crore in Q2 FY 11, as against Rs 685.18 crore in the year-ago period.
Asked if Ceat was contemplating an increase in its tyre prices, Goenka said: "no price increases are likely in the short-term."
However, the company would look at the market situation and what action its competitors were taking sometime during Q4 and then take a call on a possible price increase, he said.
Ceat's 130-tyres per day (tpd) plant at Halol in Gujarat involving an investment of Rs 600 crore would be operational by next month, he said, adding, around Rs 400 crore has already been spent and the balance Rs 200 crore would be expended by end-this fiscal.
The company has invested Rs 35 crore in ramping-up capacity at its Nashik plant from 165 tpd to 200 tpd, he said.
On whether the company planned to expand its Halol plant, Goenka said that it would depend upon how the radial tyre market picked-up. "Depending upon how the radial tyre market evolves, we will consider expansion at Halol."
The company was outsourcing some products for two-and- three-wheeler tyres, which, he said, "looks a good market and could give us good volumes."
The company will not be making any investment in this, he said.
There are no fund-raising plans presently and whatever investment needs to be done would be done through internal accruals and debt, he said.
Presently, the company's debt stands at around Rs 700 crore. "Our debt-equity ratio is around 1:1 and we plan to continue to keep it consistent," Goenka said.
