Ceat To Spend Rs 1.5bn in FY12; Sees Export Boom.

India's fourth largest tyre maker, has earmarked Rs 1.4-1.5 billion as capital expenditure in FY12 and expects exports to rise by as much as 50%, a senior official said on Thursday.

The company plans to spend about Rs 1 billion to ramp up operations at its recently commissioned radial tyre plant at Halol in Gujarat, Anant Goenka, deputy managing director, told participants in the Reuters Trading India chatroom.

This unit is currently operating at partial capacity and will have an optimum capacity of 150 MT per day.

"We will be ramping up our Halol plant, increasing outsourcing capacities. Therefore, there should be good volume growth in the year," he said.

Ceat plans to invest another Rs 100 million this year on a proposed facility at Ambernath in Maharashtra though the volumes for this unit has not yet been fixed.

"We have not decided on Ambernath volumes yet. We have acquired land and will be spending this amount on planning, grading and keeping the land ready. We still need to take a call on exact capacity," Goenka said.

The firm also has plans to double its motorcycle tyre sales to 500,000 tyres per month by end FY12 by way of an increase in outsourcing capacity.

Ceat, like other tyremakers has seen healthy sales due to an ongoing auto boom in the local market but margins have come under pressure due to robust prices of raw materials, especially rubber.

"Rubber prices over the past year has been our biggest concern. They have gone up by over 70%. They constitute about 45% of our total raw material cost base," he said.

"I believe rubber is going to continue to be at its current levels for the next three- four months as supply is the lowest in the summer and monsoon months."

Rubber prices makes up more than 40% of the cost of a tyre.

Ceat had slipped into the red in the fourth quarter as soaring raw material prices defeated a rise in sales.

Its exports, currently a fifth of total sales, are set to rise to between Rs 8 and 9 billion in FY12 from Rs 6 billion the previous year, as the firm strengthens its presence in markets like Latin America and Europe.

The Indian firm had acquired global rights of its 'Ceat' brand from Italy-based Pirelli for 9 million euros, thus getting rights to export tyres under the brand on its own across the globe.

"Exports are looking good. We acquired global rights to the CEAT brand last year from Pirelli. This opens up Latin America and European markets for us. It's a huge opportunity," he said.

Ceat shares were trading up 1.25% at Rs 97.4 in a choppy Mumbai market.

Source : moneycontrol.com