An automobile tyre. (Photographer: Gianluca Colla/Bloomberg)

CEAT’s Q1 Profit Nearly Wiped Out By Higher Costs

CEAT Ltd.’s net profit declined during the April-June quarter, missing analyst estimates, due to higher raw material cost and de-stocking ahead of the implementation of the Goods and Services Tax.

The Mumbai-based tyre manufacturer’s profit declined 98.7 percent over last year to Rs 1.6 crore, the company said in a exchange filing.. The consensus estimate of analysts tracked by Bloomberg stood at 50.47 crore.

Cost of raw materials for the tyre maker went up 23 percent in the quarter to Rs 949.8 crore. Total expenses rose 7.9 percent over last year to Rs 1,636 crore.

“As raw material prices witnessed significant volatility, we exercised tight controls over raw material covers leading to significant drop in inventory by end of June”, Chief Financial Officer Kumar Subbiah said in media statement. The company also saw some “light de-stocking” by its dealers ahead of the GST implementation, said Anant Goenka, managing director of CEAT.

Revenue for the quarter decreased 1.1 percent on a year-on-year basis to Rs 1,629 crore compared to the same quarter last year. The analyst consensus estimate stood at Rs 1,531 crore.

Earnings before interest, tax, depreciation and amortisation (EBITDA) fell 70.5 percent to Rs 55 crore on a year-on-year. Operating margin contracted 3.7 percent during the period.

Ahead of the earnings announcement, shares of CEAT fell 1.23 percent on the BSE.