Steep increase in raw material hits JK Tyre’s Q1 FY2018 revenues

An increase of over 30 percent in prices of raw materials along with an unfavourable domestic market has severely impacted JK Tyre’s revenues and margins for the first quarter of the fiscal.

The company has reported Q1 FY 2017-18 revenues of Rs 1,942 crore, a marginal decrease of 0.76 percent (Q1 FY 2016-17: Rs  1,957 crore). Net loss (after tax) is Rs 117.92 crore for Q1 FY2018, as compared to a profit of Rs 100.20 crore for the same period last year.

Commenting on the results, Dr. Raghupati Singhania, chairman and MD, JK Tyre said, "We are indeed passing through challenging times, the raw material costs increased by about 30 percent over the corresponding quarter. Such a steep increase in prices of raw materials without commensurate increase in selling prices dented margins. Moreover, unabated imports of cheap Chinese radial tyres impacted both volumes as well as prices of truck and bus radials. In addition, commercial vehicle manufacturers cut production, to destock inventories and transition to new emission norms. Dealers in the replacement market also were reluctant to off take tyres before introduction of GST. JK Tyre, being the market leader in the truck/bus radial segment in both OEM and replacement segments, had to bear the brunt."

However, Dr. Singhania feels that with the smoothening out of the GST rollout, the situation is likely to be somewhat better in the coming months. Also, the expected imposition of anti-dumping duties on cheap Chinese imports would be a welcome step and contribute towards improvement in the commercial tyre market.

The domestic tyre maker will continue to focus on expanding its distribution network as the company’s replacement market accounts for 60 percent of its total sales. JK Tyre’s newly acquired 2-3 wheeler capacity in Cavendish is also gaining market share in the segment, despite the economic disruptions in the recent months.

In April 2016, JK Tyre acquired Cavendish India Limited from Birla Tyres. This acquisition added three modem plants to its portfolio taking the total count to 12, helping the tyre major foray into the two- and three-wheeler segment as well. The company has a global presence across 100 countries in six continents, with manufacturing across 12 production plants – nine in India and three in Mexico, accounting for an installed capacity of 35 million tyres per annum.