India’s JK Tyre & Industries Ltd has reported consolidated net profit of Rs 755.9 million (£7.8 million) for the three months to 30 September 2014, the second quarter of the company’s current financial year. This result represents a year-on-year increase of 18.1 per cent. The company achieved a consolidated turnover of Rs 18.7 billion (£193.5 million), up 3.6 per cent from the second quarter of the previous financial year.
JK Tyre & Industries reports a 29 per cent year-on-year increase in net profit for its 2013-14 financial year. During the 12-month period between 1 April 2013 and 31 March 2014, the Indian tyre maker achieved turnover of Rs 82.8 billion (£833.7 million), nine per cent higher than in the prior financial year. Operating profit was up 41 per cent to Rs 8.9 billion (£89.6 million) while pre-tax profit grew 42 per cent to Rs 3.5 billion (£34.9 million). The 29 per cent expansion in the company’s bottom line brought net profit to Rs 2.6 billion (£26.5 million). The company has announced a 50 per cent equity share dividend.
The prices of shares in Indian tyre manufacturers have fallen back after rallying last week prior to the Easter weekend. According to local news sources, the shares of tyre companies plunged by up to 8 per cent each. The fact that one of the largest domestic tyre makers, MRF, reported a decline in net profit for the quarter ended March 2014 was said to have been the main precipitating factor.
The share prices of India’s leading tyre companies surged in value on Good Friday prior to the Easter weekend. Overall shares of Indian tyre companies shot up by up to 17 per cent, accompanied by heavy volumes reportedly due to “expectations of higher revenue growth during the current fiscal”, according to local news sources. Apollo Tyres, Ceat, Goodyear India, JK Tyre Industries, Balkrishna Industries and TVS Srichakra all rose by between 4 and 17 per cent each on the Bombay Stock Exchange (BSE) during Friday’s trading.
India’s automotive sector has slowed of late and this has impacted on the original equipment tyre business. One manufacturer says it is responding to this by investing more strongly in the replacement business.
JK Tyre & Industries is not the only Indian tyre maker that has announced it will invest to increase production capacity; RPG company Ceat Limited says it will expand radio production at its Halol plant in GujaratState. A total of Rs 6.5 billion (£65.7 million) will be invested in the project.
At its board meeting on 24 October, the directors of JK Tyre & Industries Ltd approved a RS 14.3 billion (£144.5 million) expansion of its Chennai factory in eastern India.
In order to increase its ASEAN region presence, Taiwan’s Cheng Shin Rubber will invest NT$2.36 billion (£49.7 million) to build a plant in Indonesia. A filing to the Taiwan Stock Exchange states that the company’s board approved plans for the factory on 15 October.
JK Tyre & Industries is reportedly planning to start its 1,000-crore rupees expansion plan at its Chennai plant within the next two to three months doubling the tyremaker’s capacity at the plant, according to the Business Standard.
Within the next two to three months, JK Tyre & Industries intends to get is RS 10 billion Chennai plant (£100 million) expansion project underway. When work is complete plant capacity will be double the current level, making it one of the company’s main export facilities.
Both Apollo Tyres and JK Tyre & Industries intend to establish new plants in Asia, and the chairman of the Indonesian Tire Producers Association says both firms are looking at his country as a potential site. Aziz Pane told Indonesia’s Investor Daily “the two investors from India are interested in coming here.” He added that each tyre maker would have to invest between US$300 million and $350 million in order to achieve a suitable economy of scale. He also opined that in order not to operate at a loss, the factories will have to be operated on a three-shift day system.
Could JK Tyre & Industries be the next Indian tyre maker to broaden its geographic footprint? Speaking with The Economic Times, company chairman and managing director Dr. Raghupati Singhania said that following the integration of Mexican tyre maker Tornel into the company, JK Tyres has “encountered some interesting propositions for possible opportunities of acquisition to catapult into a global entity.”
JK Tyre & Industries is one of three companies named as joining the International Rubber Study Group’s Panel of Associates. The Indian tyre maker’s membership, along with that of Evonik Industries and International Rubber Consortium, was announced on 15 August. The IRSG Panel of Associates now has 123 members.
On 28 May, JK Tyre & Industries poured water on news published by Indian financial daily The Financial Express, stating it had “no firm proposal” to acquire a tyre manufacturer in Southeast Asia for Rs 1.5 billion (£15.7 million) and that it had “not made any commitment whatsoever” to this effect. Yet at the time the company was still committed to investing in the region, specifically in rubber plantations. Now it appears this project has been shelved, or even dropped entirely.
In its financial results for the March to June quarter – the first quarter of its current financial year – JK Tyre posted a net profit of Rs 540.4 million (£5.7 million), a year-on-year increase of 265.9 per cent. Quarter net sales came to Rs 18,669.4 (£196.0 million), 3.3 per cent higher than in the first quarter of 2012.
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