Ceat: Higher input costs squeezing margins

Tyre maker Ceat Limited, the flagship subsidiary of India’s RPG Group, reports that its net revenue increased 23.9 per cent year-on-year in the second quarter of its financial year, the three months to 30 September 2021, to Rs 24.52 billion (£237.51 million). Despite growing revenues, EBITDA shrank from Rs 3.06 billion to 2.25 billion (£21.79 million), and the margin contracted 6.3 percentage points to 9.2 per cent. Net profit stood at Rs 420 million (£4.07 million).

Commenting on these results, managing director Anant Goenka said: “Overall market demand continues to be robust, despite some lag in commercial and farm categories. We witnessed strong growth of 28 per cent compared to preceding quarter on account of good performance in replacement market, particularly in the passenger segments. The rising cost has impacted our gross margins; however, it has been partially offset by price adjustments over the last quarter.”

On a standalone basis, Ceat’s revenue amounted to Rs 24.32 billion (£235.58 million), and the EBITDA margin was 8.9 per cent. Net profit came to Rs 360 million (£3.49 million).

“During the quarter we have achieved good top line growth and have managed our costs very well,” comments Kumar Subbiah, chief financial officer of Ceat Limited. “Our margins are in line with Q1. While the steep increase in input costs continued to put pressure on our margins, there was a slight increase in debt levels as well, largely on account of higher capex and higher inventory.”