CEAT Ltd., the flagship company of the Rs. 14,500-crore RPG Group, has reported strong results for the quarter ended March 2009. The PBT improved by 70 per cent from Rs. 21.5 crores in the fourth quarter of last year to Rs. 36.5 crores in the same period this year. High operating efficiency and exemplary working capital management yielded high profitability.
Mr. Paras K. Chowdhary, Managing Director, CEAT Ltd., said: “The company’s focus on improving operational efficiencies is reflected in the results. While we will continue maintaining our export thrust, it is our constant endeavor to increase our volumes in the domestic market. The coming year is expected to be extremely challenging. Our focus will be on enhancing value and productivity and reducing costs to maximize our top and bottomline”.
CEAT is on a major restructuring drive to shed its extra flab and improve operational efficiency. The whole process of looking inward started in 2008 when the company celebrated its 50th year with the unveiling of a new brand identity. The new branding initiative will have its impact in the next two-three years.
In terms of business, it was quite a turbulent year, according to Mr. Arnab Banerjee, Vice President - Sales & Marketing, mainly due to the hyper inflation in commodity prices in the first half. But CEAT performed better than the industry in the third and fourth quarters mainly by cutting down costs, improvement in production efficiencies, better product mix, reduced outsourcing and product mix rationalisation.
All these measures resulted in savings of close to Rs. 8 to 9 crores per month through the second half. “We expect the momentum to continue during the current year as well, and this should result in further cut-down in cost by another Rs. 5 to 8 crores per month. We are targeting cost savings to the tune of Rs. 50 to 100 crores vis-a-vis the second half of last year”, says Mr. Banerjee.
CEAT’s new radial tyre manufacturing facility at Halol in Gujarat will manufacture both passenger car and truck and bus radial tyres. The initial capacity planned was three lakh passenger car tyres and 30,000 truck and bus radials.
“The radial project being set up at Halol is progressing as per schedule, and the company expects to start production in 18 months. We are slightly raising capacity at Halol. We intend to increase the truck and bus radial capacity to 40,000 from the planned 30,000 tyres initially. In fact, the recession has only helped as the capital cost has come down, and the lead time for long delivery items has also come down. We are setting up the plant faster and at a lower capex”, adds Mr. Banerjee.
On the technology for truck and bus radials, there was speculation that CEAT might tie-up with one of the global brands for the Indian market. However, Mr. Banerjee has confirmed that CEAT is now working with a US-based consultancy group which has large expertise in all aspects of tyre technology. “We are getting into the truck and bus radial manufacturing on our own, and we are confident that we will be able to deliver a great product”.
Currently, CEAT is importing truck and bus radials and sells close to 5,000 tyres per month. To understand the dynamics of the TBR segment and the customer requirement, the company has launched a wheel management centre at Sankagiri in Tamil Nadu, which is a major trucking centre.
CEAT has started with a training centre for educating customers on new developments in trucking and wheel management and train them on the various services like wheel alignment, greasing, TBR repair, nitrogen inflation, collection center for retreading of tyres and other regular services of tyres available there.
The company is planning to take this concept to all major trucking centers, and the target is to launch 20 such stores by 2010. The wheel management centre will be a one-stop shop for truckers for buying new tyres and retreading. All these initiatives will help the company when it launches its own range of truck radials.
CEAT is also working on its bias tyres. In the bias tyre segment, the flagship brands Lug XL and Mile Xl continue to do well and the company is planning to launch two new products during the current year. Almost 60-65 per cent of the company turnover comes from the truck segment and the balance from the passenger car and motorcycle segment. This is bound to change when the Halol plant starts commercial production.
Mr. Paras K. Chowdhary, Managing Director, CEAT Ltd., said: “The company’s focus on improving operational efficiencies is reflected in the results. While we will continue maintaining our export thrust, it is our constant endeavor to increase our volumes in the domestic market. The coming year is expected to be extremely challenging. Our focus will be on enhancing value and productivity and reducing costs to maximize our top and bottomline”.
CEAT is on a major restructuring drive to shed its extra flab and improve operational efficiency. The whole process of looking inward started in 2008 when the company celebrated its 50th year with the unveiling of a new brand identity. The new branding initiative will have its impact in the next two-three years.
In terms of business, it was quite a turbulent year, according to Mr. Arnab Banerjee, Vice President - Sales & Marketing, mainly due to the hyper inflation in commodity prices in the first half. But CEAT performed better than the industry in the third and fourth quarters mainly by cutting down costs, improvement in production efficiencies, better product mix, reduced outsourcing and product mix rationalisation.
All these measures resulted in savings of close to Rs. 8 to 9 crores per month through the second half. “We expect the momentum to continue during the current year as well, and this should result in further cut-down in cost by another Rs. 5 to 8 crores per month. We are targeting cost savings to the tune of Rs. 50 to 100 crores vis-a-vis the second half of last year”, says Mr. Banerjee.
CEAT’s new radial tyre manufacturing facility at Halol in Gujarat will manufacture both passenger car and truck and bus radial tyres. The initial capacity planned was three lakh passenger car tyres and 30,000 truck and bus radials.
“The radial project being set up at Halol is progressing as per schedule, and the company expects to start production in 18 months. We are slightly raising capacity at Halol. We intend to increase the truck and bus radial capacity to 40,000 from the planned 30,000 tyres initially. In fact, the recession has only helped as the capital cost has come down, and the lead time for long delivery items has also come down. We are setting up the plant faster and at a lower capex”, adds Mr. Banerjee.
On the technology for truck and bus radials, there was speculation that CEAT might tie-up with one of the global brands for the Indian market. However, Mr. Banerjee has confirmed that CEAT is now working with a US-based consultancy group which has large expertise in all aspects of tyre technology. “We are getting into the truck and bus radial manufacturing on our own, and we are confident that we will be able to deliver a great product”.
Currently, CEAT is importing truck and bus radials and sells close to 5,000 tyres per month. To understand the dynamics of the TBR segment and the customer requirement, the company has launched a wheel management centre at Sankagiri in Tamil Nadu, which is a major trucking centre.
CEAT has started with a training centre for educating customers on new developments in trucking and wheel management and train them on the various services like wheel alignment, greasing, TBR repair, nitrogen inflation, collection center for retreading of tyres and other regular services of tyres available there.
The company is planning to take this concept to all major trucking centers, and the target is to launch 20 such stores by 2010. The wheel management centre will be a one-stop shop for truckers for buying new tyres and retreading. All these initiatives will help the company when it launches its own range of truck radials.
CEAT is also working on its bias tyres. In the bias tyre segment, the flagship brands Lug XL and Mile Xl continue to do well and the company is planning to launch two new products during the current year. Almost 60-65 per cent of the company turnover comes from the truck segment and the balance from the passenger car and motorcycle segment. This is bound to change when the Halol plant starts commercial production.
CEAT currently enjoys a marketshare of 14 per cent in the truck and bus segment and the target is 24 per cent marketshare in five years time. The company has set an ambitious turnover target of Rs. 6,000 crores by 2013.
