Mumbai: Tyre makers MRF Ltd and CEAT Ltd both reported a sharp rise in quarterly net profit, helped by stable raw material prices and increased sales in the replacement market.
MRF reported a 79% jump in net profit to Rs517.5 million and Ceat’s profit rose 63% to Rs192 million on a 9% and 5% rise in sales respectively.
Officials at both companies said sales in the higher margin after-sales markets made up for weaker demand from auto makers. MRF’s secondary market sales rose by 5%, Koshy Verghese, executive vice president, said.
“We had a better product mix suited for after-sales in the wake of a not so buoyant demand from OEMs (original equipment makers),” K.J. Rao chief financial officer at Ceat said.
Auto sales in India nearly slid 2.5% between April and December, with the fall led by two-wheelers and commercial vehicles, hit by interest rates ruling near a six-year high.
Tyre makers also benefited from the easing in rubber prices to an average of about Rs95 a kg, compared to Rs100 in the year-ago quarter, helping margins. Raw material, mainly rubber, make up about 70% of the cost of a tyre.
Ceat also gained from pre-booking rubber at prices it perceived attractive to hedge against volatility, helping core operating margins rise in the quarter to 8.9% in the quarter from 7.8% a year ago, Rao said.
On Tuesday rival JK Tyre & Industries Ltd said its quarterly net profit more than doubled to Rs217.4 million.
MRF shares ended 0.5% up at Rs4,861.10. Ceat shares have been suspended from trading to effect a spin off of its investment unit into a separate firm and will resume trading on Friday, Rao said.