Weak demand not to affect MRF investments

Tyre manufacturer MRF has said the automobile industry was going through a recession and it was unlikely to turn favourable in the immediate future.

This, according to it, would have a bearing on the tyre demand even as the after-market demand continues to prop up the industry demand.

In the midst of this, MRF said the capacity additions in the tyre industry would further fuel competition, leading to huge pressure on the margin front, especially in the truck radial segment.

In a letter to shareholders, MRF chairman and managing director K M Mammen said: “It has been a tumultuous year for the industry as well as the country. The economy slumped and the economic indicators do not show any revival in the immediate future. The automobile industry has been one of the worst-hit with most companies pruning production in view of tepid demand.”

“The year ahead would be beset with political uncertainties impacting the economic environment and one is awaiting clarity on our overall industrial and fiscal policies.”

However, Mammen is optimistic the company would continue to make investments in its existing plants to increase overall revenue and share.

According to him, despite the weak Rupee, the company has managed to clock margin growth due to stable raw materials in 2012-13. The period saw a 4 per cent increase in tyre production across all segments.

The company’s 2012-13 annual report stated it would achieve improved results due to improved operating efficiencies and cost reduction measures which it has undertaken over a period of time.

The company in 2012-13 reported a turnover of Rs 13,445 crore, which is 3 per cent higher than the Rs 13,054 crore posted in 2011-12. Earnings before interest, taxes, depereciation and amortisation in 2012-13 amounted to Rs 1,796 crore as against Rs 1,293 crore in the previous year.

Its Sri Lankan operations continue to be profitable and plans are afoot to increase its revenue further, Mammen added.

Exports turnover stood slightly above at Rs 1,293 crore for the year ended September 30, 2013, as against Rs 1,281 crore of the previous year.