CEAT

The QoQ net profit of the company for Q2FY13 slipped 87% at Rs.3.80 crore though YoY, it was up 69%. The YoY rise could have been much higher and the sequential fall could have got stemmed but for the exceptional expense of Rs.14 crore and this was largely on account of the change in the method of providing for warranty from actual claim basis to expected cost. The company has a huge debt too, which at end of Q2FY13 stood at Rs.1098 crore. Interest outgo till end of H1FY13 was at Rs.104 crore and during the quarter, this was after it got down the debt by a meager Rs.60 crore. The lackluster performance can be blamed on poor offtake in exports and replacement volumes also not picking up.

Its raw material cost, which comprises mainly of rubber, at Rs.864 crore for current Q2 was more or less around the same levels as in Q2FY12 though it has come off sequentially. Rubber prices remained lower but prices to kick up, as is seen seasonally, in Q4.The rupee depreciation is a factor to watch out for in Q3. The company is confident of having a much better H2FY13 as it expects volumes to pick up. In Q3 it expects tonnage of sales to be around 53550 to 54570 compared to 51,000 in Q2. Growth will be driven by domestic sales and lesser by exports in current Q3 given the sluggishness in Europe.