CEAT’s Q1FY25 net profit grows 7% YoY despite weak operating performance

Tyre maker CEAT Ltd posted a 7.1% on-year growth in its net profit for the first quarter of the financial year 2025. Net profit rose despite a decline in operating profit on account of a one-time gain arising from a reversal of charges that it spent on buying licenses to fulfill its EPR obligations earlier, share of profit from joint ventures and higher other income.

The Mumbai-based company clocked Rs 154.2 crore in consolidated net profit for the April-June period, against Rs 144 crore in the year-ago quarter. Revenue from operations rose 8.8% on year to Rs 3,192.8 crore, supported by healthy replacement market demand and exports.

CEAT, the flagship company of RPG Enterprises, generates almost 53% of its business from the replacement market, followed by the OEM market, which contributes 28%. Exports account for 19% of the company’s revenue. “We are encouraged by the strong growth we’ve had in the replacement and export segments across all categories during the quarter,” MD and CEO Arnab Banerjee said.

The operating profit, or Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA), declined by 1% on year to Rs 382.8 crore, while its EBITDA margin contracted to 12% from 13.2% in the year-ago period, according to our calculations.

The operating profit margin was impacted by an increase in commodity prices and higher marketing expenses. The company’s total expense rose at a higher rate than revenue. Total expenses grew 9.7% on year during the quarter.

Banerjee said the company is facing margin pressure from significant increases in raw material costs and ocean freight, and is mitigating the challenges through strategic price adjustments.

“The operations margin declined during the quarter, primarily due to an increase in commodity costs and higher marketing spends, while we maintained strong controls over operating and manpower costs, ensuring efficient resource utilization and sustained financial health,” CFO Kumar Subbiah said.

The company recorded a total one-time gain of Rs 7.46 crore during the quarter. This reflects a reversal of Rs 11.5 crore related to the earlier purchase of licenses to fulfill its Extended Producer Responsibility obligations. It also recorded a one-time expense of Rs 4 crore on account of a voluntary retirement scheme.

Apart from the one-time gain, net profit growth also got a boost from the share of profit from its joint ventures and other income. CEAT recorded Rs 5.3 crore as a share of profit from JVs and associates, while it had recorded a loss of 2.4 crore in the year-ago period. Other income during the quarter almost doubled to Rs 6.2 crore from Rs 3.3 crore.