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Ceat Q3 net slumps; sees margin pressure ahead

Ceat Q3 net slumps; sees margin pressure ahead
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First Published: Tue, Jan 25 2011. 03 11 PM IST
Updated: Tue, Jan 25 2011. 03 11 PM IST
Mumbai: Ceat Ltd, India’s fourth largest tyre maker, reported a 79% fall in October-December profit hurt by soaring raw material costs, especially that of rubber, and expects the pressure to continue, a senior official said.
“It has been a little difficult in the past three months to pass on the price increase,” Anant Goenka, deputy managing director, told business news channel CNBC-TV18.
Rubber prices make up over 40% of the cost of a tyre.
In October-December, local rubber prices jumped nearly 23% after unseasonal rains curtailed domestic supplies and as overseas markets rallied. Domestic prices have surged 73% over the past 12 months.
The RPG group company posted a quarterly net profit of Rs50.1 million, compared with Rs240.2 million a year ago. Net sales rose to Rs895 crore from Rs715 crore.
Reacting to the weak earnings, shares of Ceat fell more than 5% to their 52-week low. At 2:58 pm, the stock was at Rs117.65 down 4.19%.
“We are looking at some price increase in the coming times. We had also given a small price increase in January as well,” Goenka said.
But the planned increase in product prices will not offset the raw material price increases that have happened in the past 12 months, he said.
“There will be further pressure in margins for the coming three-four months,” he said, adding the company is expected to offset the impact in the longer term through operational efficiencies and further price increases.
Rival JK Tyre had also reported a 75% drop in October-December net profit, hurt by escalating input costs.
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First Published: Tue, Jan 25 2011. 03 11 PM IST
More Topics: Company results | Ceat | Tyre maker | Q3 | Profit |