CEAT Ups Tyre Price, See Better Margins As Rubber Drops.

India's fourth largest tyre maker, last week raised prices of tyres 2% to 2.5% across categories, and expects margins to improve from September quarter due to a fall in prices of rubber, its key raw material, a senior official said.

"Rubber prices have come down from its peak. It should benefit us from Q2, but it will reflect clearly in the Q3 as we keep inventory of 2-3 weeks," Anant Goenka, deputy managing director, told Reuters in an interview on Tuesday.

Natural rubber makes up more than 40% of the cost of a tyre and its prices have fallen 13% from its peak of 24,300 rupees per 100 kg struck on April 5.

Reacting to the comments, shares of the company extended gains and rose more than 3%. The stock later pared the gains to close up 2% at Rs 109.05 in a weak Mumbai market.

The company has no plans to raise tyre prices further, he said.

"Rubber prices are likely to fall more in coming days," he said, adding the company raised imports of block rubber in the past two months due to cheaper availability in the international market.

"We are consuming 6,000-7,000 tonnes natural rubber every month. Now, nearly 2,000 tonnes out of it is coming from imports," Goenka said.

India, the world's fourth-biggest producer of natural rubber, imports from Thailand, Indonesia, Malaysia and Vietnam.

Tokyo's key rubber futures eased on Tuesday as profit-taking emerged after the benchmark contract's up to 4% climb the day before, but an easing of concerns about economic growth and rallies in Shanghai supported the downside.

Goenka said the slowdown in the domestic auto industry is unlikely to hit sales of the company as most of its volumes were generated by the replacement segment and only 14% account for original equipment manufacturers (OEMs).

"In replacement segment, demand is steady. We haven't witnessed any fall," he said.

Car sales in India have been slowing down over the past few months. They rose 7% in May, the slowest pace in two years, and analysts expect a further decline as higher fuel prices, interest rates and vehicle costs crimp demand in the world's second-fastest growing vehicle market.

The company's revenue is likely to rise 40% in FY12 as it recently commissioned a radial tyre plant at Halol in Gujarat.

"Demand is rising for radial tyre. Halol plant is producing only radial tyres...I am expecting 40% rise in revenue."

The Halol unit is currently producing 30-40 tonnes tyres per day and will have an optimum capacity of 150 tonnes per day.

The company has earmarked Rs 1.4-1.5 billion as capital expenditure for FY12 and expects exports to rise by as much as 50%.

Source : moneycontrol.com