CEAT Concall Summaries

CEAT Q1 FY19 Summary

• Our quarter one consolidated net revenue from operations grew by 16.9% year-on-year and 1.9% quarter-on-quarter. Our revenues stood at 1,706 Crores for the quarter, the growth has been largely driven by volumes
• Our consolidated gross margins stood at 39.3% for Q1. It has contracted marginally by about 32-basis points sequentially largely due to increase in raw material cost arising out of increase in crude oil prices and depreciation in the Indian currency.
• We saw about 2% price increases for the raw material in Q4 to Q1 and expect the similar kind of impact 2-3% from Q1. Took about approximately a 1.5% to 2% price increase in Q1 on an average across segments
• Axle Norms: So, while weight limit has increased by about 25% we think that the impact can be about maybe a 5%, 7% or 10% adverse impact on delta growth going forward. So, we expect OEM commercial vehicle sales to get impacted. Tyre size can increase to cater to higher axle norms
• Took 1% price increase in July 2018 in two wheeler segment. This was independent of competition and a unilateral decision. Ceat was already priced at a premium and price gap with competition would have increased even further after hike 
• Working Capital: Managed to bring our working capital down and we have given of about 130 Crores or so in Q1. So that helped us to repay the debt and whatever cash that we were able to generate was more or less matching with the additional capex required, so we are able to achieve both in terms of ensuring capex requirement is met and also in bringing the capex debt levels to come down
• Capex guidance of INR 1,500 crore in FY19 with INR 200 cr done in Q1FY19
• Ambernath plant in early stage with capacity utilisation of 25-30%
• Raw material sourcing: Typically buys from local source it is largely sheet rubber and block rubber we always import because it not produce in India; however, the percentage vary depending on availability and also what is the kind of cover that we would like to have. Normally the raw material prices impact us with the lag of about two to three months and depending on our overall physical and total covers.