Tire companies disclose performance, profits plummet 18.6%
On January 15, 2025, CEAT, a well-known Indian tire manufacturer, released its sales performance from October to December. Unfortunately, it did not reproduce the high growth of the same period last year. On the contrary, quarterly profits fell sharply by 18.6%. Let's take a look at what happened to this tire manufacturer.
Sales rose, profits plummeted
Because the time calculation method used by Indian tire companies is completely different from many regions-April is the beginning of the new fiscal year. Therefore, the third quarter of its fiscal year usually refers to the period from October to December of that year.
From October to December 2024, CEAT achieved a high sales growth of 11% in three months, reaching 33 billion Indian rupees (about 2.8 billion yuan), thanks to the growth in demand in the tire replacement market.
But unfortunately, the growth in tire sales did not drive profit growth as in the past. From October to December, the company's earnings before interest and taxes (EBITDA) fell 18.6% year-on-year to 3.5 billion Indian rupees (300 million yuan).
In the same period of 2023, CEAT's profit margin was 14.4%, but in the last three months of 2024, CEAT's profit margin plummeted to 10.5%.
CEAT attributed the decline in profit margins to rising raw material costs, which even the price increase failed to fully offset. "Rising raw material costs have affected our profit margins, but CEAT has gradually passed on the cost pressure by raising prices for certain categories of tires this quarter," said CEAT's managing director and CEO.
For CEAT, their goal from January to March 2025 is to remain stable. However, its CEO said that its "full track" order volume remained stable in January. At the same time, after entering 2025, raw material prices have not fluctuated much, which will help it maintain sales growth from January to March.
Although CEAT believes that its sales will continue to rise, looking at the current natural rubber prices, the cost pressure of this tire manufacturer is still huge.
High natural rubber prices
On January 22, 2025, natural rubber prices have fallen for three consecutive days, falling below 17,500 yuan per ton. However, such prices are still very high in the eyes of tire manufacturers. In addition, it is now the tapping period in many major natural rubber producing areas, so prices are expected to rise again after the Spring Festival.
Faced with high manufacturing costs, 9 tire companies have announced price increases. Multiple specifications of 22.5-inch tires, which are popular in the truck tire market, have been scheduled to increase in price from February, with a maximum increase of 3%. Some popular passenger car tire specifications will also experience a price increase of up to 10% in February.
As it is currently the Spring Festival holiday, some companies have stopped working one after another, so the market has received more price increase notices from foreign-funded companies.
As tire companies resumed work after the holiday in early February, it is likely that more tire companies will follow the trend of price increases by taking advantage of the head companies' price increases - as long as the price of natural rubber rises, the Chinese tire market will surely usher in a new wave of price increases.
