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Indian tyre makers see better fortunes ahead
By siliconindia staff writer
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Thursday, 12 February 2004, 20:30 IST
NEW DELHI: India's top tyre makers, hurt by the rising cost of rubber, reported lower profits in the past quarter but expect earnings in the following months to be boosted by a hike in tyre prices and higher summer demand.
Industry officials said the price of natural rubber, their main raw material, jumped nearly 50 per cent to Rs 50-55 a kg (around $1.10) from a year ago even as competition prevented firms from passing on the rise to consumers in October-December.
Most firms increased tyre prices about one to three per cent in January-February and a seasonal upswing in demand from March should improve earnings this quarter and the next.
"Profits fell because of a significant increase in raw material prices which the tyre makers were unable to pass on to customers because of a very competitive industry," executive director marketing at Chennai-based MRF Philip Eapen told Reuters.
Market leader MRF Ltd saw net profit fall 17.6 per cent in October-December from the previous year. Net profit fell by 38.6 per cent at second-ranked Apollo Tyres Ltd.
Helped by a merger, JK Industries Ltd, the number three player, reported a sharp profit rise from the previous year, but profit compared with the previous quarter was down 61.1 per cent.
Eapen said MRF increased prices by 0.5 to one percent this month. Main rivals, Apollo and JK, hiked tyre prices in January.
India's tyre industry, which has estimated sales of $2.2 billion, posted robust results in 2002-03 as a surge in truck sales boosted tyre production by 16 percent. Truck and bus tyres make up 70 per cent of tyre industry revenues.
JK Industries marketing director Ajay Kapila told Reuters part of the problem in the past quarter was that sales to vehicle makers grew much faster than the replacement market.
"Sales to the auto sector are rising at about 30 per cent but after-market demand has not grown at that rate," he said.
Replacement demand contributes over 70 per cent to tyre sales and is key to the industry's fortunes. Direct sales to vehicle makers, where prices are lower, comprise the rest.
Kapila said he expected replacement demand to increase from March, as goods movement increases in the last month of the fiscal year and India's scorching summer increases tyre-wear.