Rubber prices to remain stable at Rs 160/kg: Ceat

Ceat attributes better performance to improved performance in profit-making segments and reduced raw material prices. Anant Goenka, MD of the company says that stable input costs boosted bottom-line and margins in the quarter. Also, shift of the product mix to more profitable segments such as non-truck area picked up the performance, he tells CNBC-TV18. Rubber prices too have come down to Rs 160/kg from Rs 190/kg (YoY), which helped the input costs, he adds. 

The company also has plans to pare down its debt going forward. It has been brought down to Rs 400 crore in the year and will be reduced by another Rs 100 crore by the year-end, Goenka adds. 

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Below is the edited transcript of his interview to CNBC-TV18.

Q: Your top-line numbers has come in about Rs 100 crore higher year on year, but your consolidated net profit is seen a substantial jump from Rs 3.8 crore in the same period last year to Rs 76.5 crore. Can you explain what has contributed to that very big jump?

A: Quarterly earnings have been consistently going up over the past five quarters. On a year on year basis, raw material prices have come down since last year. They have been stable since about February-March of this year. It is certainly one area that has helped.

Our product mix has shifted towards the more profitable segments as well as markets. We are selling more and more towards the non-truck segment where we find more profitable.

We have been focusing tremendously on exports. The rupee has also helped us to that extent. Overall, on quarter on quarter basis, margins have gone up some amount as well on year on year basis.

Q: Are you saying this big jump in consolidated net profit from of Rs 3.8 crore to Rs 76.5 crore is all operational? Is there is no element of exceptional items or other income in it?

A: There is no exceptional item in it. It is all out of operations. It is a mix of raw material stability, and being able to shift our product margins.

Q: How have the input cost panned out in terms of rubber prices? Have you seen a bit of cooling off? Have you been able to enjoy much higher margins than you would have the same quarter last year?

A: Yes. Rubber prices certainly have come down. Same quarter last year they were about Rs 190 per kilogram. They did come down and stabilized at about Rs 160 per kilogram. Towards part of this quarter, Q2 it went back up to Rs 190 some of that effect could come in Q3. Generally, raw material prices have been quite stable; nearly all year round this year. Rubber prices have been about Rs 160.

Q: How is your cash situation right now? Would you be looking to pare your debt in anyway because consistently your finance costs are about Rs 50 crore per quarter? Is that something that will work along now going forward?

A: Yes. For the past year and half, it really has been our core focus. We have been able to bring down our debt by about Rs 400 crore nearly in about a year’s time. Only in this quarter, our debt levels have gone up marginally.

It was primarily due to a couple of strategic calls on increased raw material buying and increased finished good inventory. It is purely a tactical call which we can bring down.
 
Going forward, we believe we can bring this down by another Rs 100 crore or so at least by the end of the year.