Lower material costs help MRF double net quarter profits, despite Chinese competition

India’s MRF Limited reports that its year-on-year net profit almost doubled in the three months to 31 March 2015. Net profit during the period amounted to Rs 3,326 million (£34.4 million), up 94.6 per cent on the Rs 1,709 million (£17.7 million) earned in the first three months of 2014. This huge jump in profit was achieved in spite of hefty competition from imported Chinese tyres, and was facilitated by much lower natural rubber prices – Mumbai-based stock and wealth trading company Angel Broking reports that MRF’s raw material costs declined from 65.7 per cent of sales in the second quarter of calendar year 2014 to 57.4 per cent of sales in the reporting period. Net income of Rs 33,120 million (£342.7 million) for the quarter was only 0.4 per cent higher than a year ago.

In another document, mentioned by Indian financial daily Business Standard on 28 April, Angel Broking states that a “surge in cheaper Chinese imports” are taking away replacement market share from MRF and other domestic tyre makers in India. Angel Broking anticipates, however, that MRF will “sustain itself against the Chinese imports and maintain a stable position in the replacement market owing to its diversified product mix and leading position.”

The Business Standard blames US anti-dumping duties for the surge in the number of Chinese tyres imported into China; according to ‘industry data’ quoted by the publication, imports of Chinese tyres into India increased 31 per cent between 2012-13 and late 2014, to Rs 6.13 billion (£63.4 million), and the value of Chinese tyre imports may have reached Rs 8.0 billion (£82.8 million) in 2014-15.

India’s domestic tyre makers and industry association the Automotive Tyre Manufacturers’ Association (ATMA) seek an increase in tyre import duties.