Mumbai: Ceat Ltd , India’s fourth largest tyre maker, slipped into the red in the fourth quarter as soaring raw material prices defeated a rise in sales, causing its shares to fall.
Prices of natural rubber have risen more than 14% percent so far in 2011. Rubber prices makes up more than 40% of the cost of a tyre.
The most traded RSS-4 variety is currently trading at Rs 23,600 per 100 KG.
For the quarter ended March, Ceat reported a net loss of Rs 11.9 crore compared with a net profit of Rs 15.3 crore. Net sales rose to Rs 978 crore from Rs 770 crore.
“The cost push was the primary reason for the impact on margins. Raw material costs have gone up by about 40% over the previous year,” Anant Goenka, deputy managing director said.
The firm has not been able to raise tyre prices to the required extent.
Ceat managed to raise prices by 18-20% in FY11. It has increased prices of tyres by an average of 4.5% in April to protect margins.
The firm plans to take another price increase of between 4-5% in end of May or early June, but improving margins will still be a challenging task.
This is partly because its recently commissioned radial tyre plant at Halol would function only at part capacity and would still take 2-3 quarters to break even, Goenka said. This unit has a optimum capacity of 150 tonnes a day.
Goenka also said rubber imports were not viable due to the narrowing gap between local and international prices.
“Imports are no longer viable. We are finding international prices very similar to Indian prices,” Goenka said.
“We did do some imports post the Japan-tsunami time period as international prices had crashed. But prices went back up pretty fast”.
Shares in Ceat closed down 6.19% at Rs 100 in the Bombay Stock Exchange. The shares had fallen more than 7% earlier in the session.