Ceat plunges 10%, hits 9-month low post September quarter results

While the steep increase in input costs continued to put pressure on margins, there was a slight increase in debt levels as well, largely on account of higher capex and higher inventory, Ceat said.

Shares of Ceat slipped 10 per cent to Rs 1,165, hitting a nine-month low on the BSE in Tuesday’s intraday trade after the firm reported 77 per cent year-on-year (YoY) decline in consolidated net profit at Rs 42 crore in Q2FY22, due to the higher depreciation and interest cost. The auto tyres and rubber products maker had posted a profit of Rs 182 crore in a year ago quarter.

On the National Stock Exchange (NSE), the stock dropped 8 per cent to Rs 1,191 in intra-day trade. The stock of RPG group was trading at its lowest level since January 8, 2021. At 10:52 am; the stock was down 5 per cent at Rs 1,230.70, as compared to 0.07 per cent decline in the S&P BSE Sensex.

For July-September quarter (Q2FY22), Ceat posted 23.9 per cent YoY growth in consolidated sales at Rs 2,452 crore. Gross margin contracted by 956 basis points (bps) year-on-year (YoY) and 203 bps QoQ to 36.9 per cent, impacted by cost inflation and mix. However, the company's margins improved slightly by 11 bps sequentially to 9.2 per cent despite gross margin contraction due to controlled employee costs and other expenses.

The management said, while the steep increase in input costs continued to put pressure on margins, there was a slight increase in debt levels as well, largely on account of higher capex and higher inventory.

During H1FY22, net long term borrowings rose by Rs 260 crore, with working capital cycle also getting stretched amid higher inventories. Ceat will be issuing non-convertible debentures (NCDs) upto Rs 500 crore.

Commenting on the quarter gone by, Anant Goenka, Managing Director, CEAT, said, “Overall market demand continues to remain robust, despite some lag in Commercial and Farm categories. We witnessed strong growth (28 per cent) compared to the preceding quarter on account of a good performance in the Replacement market, particularly in the Passenger segment. Rising input costs has impacted gross margin. However, it has been partially offset by price adjustments over the last quarter.”