CEAT expects margin pressure to persist in the coming quarters as rising raw material costs continue to weigh on profitability, with the tyre maker planning further price hikes across replacement, OEM and export markets to offset inflation.
The company reported a 96.4% year-on-year decline in consolidated net profit to ₹4 crore for the first quarter ended June, despite a 22.4% rise in revenue to ₹4,318 crore. EBITDA fell 5.7% to ₹365 crore, while EBITDA margin contracted 250 basis points to 8.5% from 11% a year ago.
“We have seen margin impact due to raw material cost in Q1 and the impact is still lagging,” Arnab Banerjee, Managing Director & CEO, CEAT, said. He added that margins had declined to 9.1% in Q1 from 14.7% in Q4, reflecting the sharp increase in input costs.
Banerjee said the company expects raw material inflation to continue in the second quarter, led by rising crude oil and natural rubber prices. “We will be seeing price hikes… At least a 7-8% minimum price hike is required in the replacement market in Q2. For OEMs, we implemented a price hike from July 1, while international business is also expected to see price increases of around 8%,” he said.
He added that margin recovery is likely only after the third quarter, subject to an improvement in the geopolitical situation.
Underlying Demand Resilience
Despite the pressure on profitability, Banerjee said demand remained robust across most business segments. “Strong domestic demand, including rural demand, continued through the quarter. We saw good growth in the two-wheeler, passenger vehicle and truck and bus segments. OEM and premium segments have also grown, while the post-GST cut boost is continuing,” he said.
CEAT’s domestic business grew 18.5%, supported by healthy replacement demand in rural markets and premium product demand in urban centres. The company also reported over 30% growth in its off-highway tyre business and said it currently has a two-month export order book.
Separately, CEAT’s board approved an investment of ₹1,205 crore to expand manufacturing capacity in the two-wheeler tyre segment. Banerjee said the company is scouting for a suitable location for the new facility, although a final site has not yet been identified.
Looking ahead, CEAT expects double-digit growth in the second quarter, supported by sustained demand across domestic and export markets, even as higher raw material costs continue to pressure margins.