Higher wages, ad costs pull Ceat Q1 net down 21% to Rs 51 cr

Mumbai: Tyre maker Ceat today reported 21 percent decline in consolidated net profit at Rs 51.66 crore for the April-June quarter because of increase in wages and higher advertisement cost.

The company had posted net profit of Rs 65.32 crore in the April-June period of the 2013-14 fiscal.

Net sales rose however to Rs 1,453.10 crore in Q1, 2014-15 from Rs 1,316.91 crore in the year-ago period, Ceat said.

"Our profit could certainly have (been) better. Last year was a good year for us. We need to work towards taking this forward," Ceat managing director Anant Goenka told PTI.

 Higher wages, ad costs pull Ceat Q1 net down 21% to Rs 51 cr

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"But then, on the sales front, we have seen some increase which has come from the lower profit segment of OEMs (original equipment makers) where we find margins variably lower. Market mix has worked adversely," he added.

The increase in advertising cost and and employee cost, which in turn, had an impact on the overall costs, he said.

"Besides, on the realisation sides too, we have seen a dip because of the market mix," Goenka said.

Stating that the overall demand looks good going forward, Goenka said the demand, particularly from the replacement segment, looks "quite promising".

The replacement segment accounts for around 60 per cent of the overall sales, he added.

"We are beginning to see a positive change in passenger and commercial segments, although it is too early to count on gains," he said.

Goenka said influx of Chinese products at low-price points remains a challenge for the global tyre industry.

On pricing, he said it has been quite stable but in some cases the increase the raw material prices was passed on to OEMs. "But largely in the replacement segment it has been stable."

On the raw material prices, Goenka said he expects the rubber prices to be stable between $135-150 per tonne going forward.

"It was business as usual for us in the first quarter of FY15. We successfully managed to lower our debt levels. Our debt/equity currently stands at a healthy 1:1. The impact of this exercise was evident as the interest costs went down by Rs 4 crore," CFO Subba Rao Amarthaluru said.

Ceat shares closed at Rs 626.45 apiece, down 5.84 per cent, on the BSE from its previous close.

PTI

Updated Date: Jul 22, 2014 20:42:09 IST