Will continue to grow at 10-15% levels: Ceat

The RPG group company posted a consolidated net profit of Rs 29 crore for the first quarter ending June of FY13 as against the loss of Rs 41 crore the company posted for the same period last year.

The net sales of the tyre maker rose 10% at Rs 1,225 crore for April to June of 2012 versus Rs 1110.5 crore it posted for the same period last fiscal, even as volumes are under pressure with the overall slowdown in the industry.

Goenka says slowdown in Europe and South America is hurting exports. "The replacement volume growth has been sluggish at less than 3%," he told CNBC-TV18.

Ceat expects volume growth to improve in the second half of the year. "We will continue to grow at 10-15% levels," he says.

Below is the edited transcript of Goenka's interview with CNBC-TV18.

Q: Can you take us through what was behind the good numbers was it largely lower rubber prices or other factors which contributed?

A: If you were to compare it to last year same time, then last year was a difficult quarter for us because of increased interest in depreciation from our new plant at Halol. Secondly, last year rubber prices had reached its peak. Since then rubber has stabilised a bit, our Halol plant has ramped up as well. We have taken some action with respect to shifting towards more favourable market and product mix.

So, we are finding with rupee depreciation exports becoming quite profitable. We are moving more towards the non-truck segment which we find, a segment to be less volatile with respect to rubber prices as well as more profitable. So, these actions from the management’s side has also helped.

Q: Your revenues have grown about 10% but they are flattish and a bit lower quarter on quarter (QoQ) do you expect significant double-digit revenue growth driven by the Halol plant off take now?

A: We have seen some sluggishness with respect to overall growth. The overall macro economic environment is not in a great position right now. We find that our original equipment manufacturer (OEM) customers are beginning to cut capacities. On the export side, there is a slowdown in Europe as well as South America. Because of all these reasons we are finding some slow down with respect to overall demand.

Secondly, there is radialisation which is also happening which is causing demand for the older technology truck bus bias tyres to go down. While radials are replacing truck bus bias tyres, so there is one segment which is degrowing, one segment which is growing. So, net-net the overall growth therefore is not very high in volume terms.

Q: Which segments are you seeing most sluggishness from?

A: Currently, we are seeing sluggishness from export. Replacement segment is also flattish at about 0 to 3% kind of volume growth. In the OEM we are beginning to see some cuts from our customers as well. So, in nearly all segments we are seeing challenges with respect to growth.

Q: Do you see these challenges intensifying as the year progresses, I am asking you what the trends are in the current quarter in July-August so far?

A: No, I would not say that these challenges would intensify. We are taking strong actions to make sure that we continue to grow at about 10-15% levels and I see that kind of growth continuing. I believe that growth will accelerate going forward for the rest of the year.