Expect Positive Shift In Exports From Q1: CEAT

Now, it is ramping up for further growth as it expects exports to pick up again, as raw material prices soften and demand for passenger cars, trucks and buses rise, a senior company executive said.

Consolidated net profit figures marked a 428% growth on the back of lower raw material cost. Operating revenue rose to ₹2,875 crore in Q4FY23, compared to ₹2,592 crore in the year-ago quarter. Ebitda margin also rose to 13% in Q4, up 600 basis points a year ago, and 400 bps sequentially.

“Exports were a bit challenged during the year primarily because of the macroeconomic headwinds. Most developed nations were undergoing some amount of recession, and in developing countries, especially around India, depreciating currencies hit demand badly. So, international business saw some slowdown," Anant Goenka, CEAT vice chairman, said.

Goenka had recently stepped down as MD and chief executive of the firm to take up a broader role in RPG Group’s businesses.

“The worst is over for exports already, I’m quite optimistic. We have been investing in specialty tire business, which is the off-highway tire segment that we largely sell to Europe and US markets," he said.

There we are seeing good buying. That should see some positive uptick, say, from quarter one itself. In fact other markets are also seeing a slight positive shift.

We’ve been investing a fair bit for passenger segment and trucks in Europe. On both sides we are coming in with a relatively low base.

And there is only one way forward, which is to grow in both segments. In US, we are developing our products, and are still about a year away from launching products."

Europe and the US together account for nearly 45% of the company’s export revenue.

“A few things that put us in a good position at CEAT this quarter was investment in capacities in the last 3-4 years. The capacities have now begun to get well utilized and we’re getting good operating leverage as a result of it. We still have 15-20% upside in terms of capacity.

To that extent, with low or limited capex we can see more growth. Raw material cost has fallen from the substantial highs in the year earlier," he added.

“For us about 15% of our raw material basket is crude and crude derivative products, and about 35040% is natural rubber. We have seen a slowdown in prices in both which too has helped margins. So, in addition to growth, operating leverage improvement of efficiencies, we’ve got some positive tailwinds in terms of raw material pricing", Goenka told Mint.

During the fourth quarter of the year, CEAT’s overall volumes grew by 7% quarter on quarter and 6% on a yearly basis. Replacement volumes increased by 5% Q-o-Q and 5% Y-o-Y, while OEM volumes grew by 8% Q-o-Q and 20% Y-o-Y. However, the exports volumes decreased by 15% Q-o-Q and 11% Y-o-Y. The TBR (truck and bus radial) segment reported double-digit Q-o-Q growth, and there was healthy momentum in the farm and specialty strong growth Q-o-Q followed by two-wheelers (2Ws), while the demand for PCR (passenger car radials) was moderate.