CEAT plans to hike tyre prices by 4-6% this quarter to offset rising raw material costs. Managing Director Arnab Banerjee said, "The price increase has been massive, though inadequate." The company saw profits fall to ₹112 crore in the July-September quarter as raw material prices rose by 23-24% since April.
Tyre maker CEAT Ltd plans to raise prices across categories by 4-6 per cent this quarter to offset higher raw material costs, its Managing Director and CEO Arnab Banerjee said on Wednesday.
Although the company has raised prices in the last two quarters, it could not fully offset inflation in major raw materials such as rubber and petroleum-based items. This was reflected in its second-quarter earnings, where profit plunged nearly 40 per cent, and margins fell into single digits.
"The price increase has been massive, though inadequate. We still have to cover; we still have to increase prices in the replacement category. OEM pricing will come in through indexing. And international business pricing also has to increase," Banerjee told PTI.
CEAT's consolidated revenue from operations during the July-September quarter stood at ₹4,762 crore, up around 26 per cent on year. Revenue growth comes on the back of higher volumes and improved realisations, led by price hikes taken across segments.
The company's net profit, however, fell to ₹112 crore from ₹186 crore in the year-ago period as its operating profit margin declined by 403 basis points to 9.5 per cent during the period. This slump in profit and profitability reflects strong increase in raw material prices and the need for further product price hikes to offset the impact.
When asked about future price hikes, Banerjee said: "We are expecting about 4-5 per cent. In the commercial category, it will be a little bit more, about 6 per cent. In the replacement segment, a small price hike was announced at the end of the second quarter, which is already effective or will take effect by the end of October.
"Fresh price hikes, we are going to announce...will take place through the month of October. We need fresh price hikes in replacement segment, and we will continue doing it in stages. International business, we cannot announce price hike across countries. So, we will go selective one by one."
He noted that raw material prices rose by almost 8 per cent in the second quarter while it increased 23-24 per cent between April and September. "Going forward, there will be a further rise of 2.5-3 per cent. So by December, we will have some 26-27 per cent kind of raw material price increase over March," he said.