CEAT forecasts positive double-digit growth amid rising rubber costs

CEAT's positive growth: CEAT Ltd is a prominent tire manufacturer in India. It has anticipated achieving double-digit growth in its replacement and international business segments for the fiscal year, despite a struggle with rising natural rubber prices that involved price hikes of its products.

Arnab Banerjee,(MD and CEO of CEAT Ltd) has disclosed that the company has already implemented a price hike of 2-2.5 per cent in the replacement tire segment since May, with plans for further price adjustments by the end of July. Despite these challenges, CEAT remains positive about sustaining decent demand across various categories, majorly driven by rural market recovery and decent growth in international markets.

Banerjee said, " We expect steady and positive growth, aiming for double-digit expansion in both the replacement segment and our international operations, barring unforeseen obstacles," 

CEAT has reported substantial revenue growth in the first quarter of the fiscal year, highlighting it to revive their rural demand, successful premium strategies, and strong performances in the commercial vehicle and two-wheeler segments.

Regarding the impact of rising natural rubber prices, Banerjee has acknowledged the strain on margins and noted that prices have reached a 13-year peak of over Rs 200 per kg. The company's active response included adjusting tire prices to mitigate the cost impact, though further adjustments may be necessary to fully offset these increases.

Emphasising the lag in adjusting prices for supplies to auto manufacturers and international markets. Banerjee said, "We estimate that a cumulative 5-7 per cent price hike from April levels would be necessary to adequately address the rise in rubber costs," 

Despite these challenges, CEAT remains positive about the economic outlook, citing positive indicators such as robust GDP growth, favourable highway and mining activities, and promising monsoon conditions. "We are entering the festive season with a strong footing," Banerjee said.

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