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CEAT Ltd Achieves 7.1% Net Profit Growth In First Quarter FY2025
CEAT Ltd reported a 7.1% year-on-year increase in net profit for the first quarter of FY2025, despite a drop in operating profit. This rise was attributed to a one-time gain from reversing charges spent on buying licenses for EPR obligations, profits from joint ventures, and higher other income.
The Mumbai-based tyre manufacturer achieved a consolidated net profit of Rs 154.2 crore for the April-June period, compared to Rs 144 crore in the same quarter last year. Revenue from operations increased by 8.8% year-on-year to Rs 3,192.8 crore, driven by strong demand in the replacement market and exports.
Revenue Breakdown and Market Segments
CEAT, part of RPG Enterprises, derives nearly 53% of its revenue from the replacement market, with the OEM market contributing 28%, and exports making up 19%. "We are encouraged by the strong growth we've had in the replacement and export segments across all categories during the quarter," said MD and CEO Arnab Banerjee.
The company's operating profit or EBITDA fell by 1% year-on-year to Rs 382.8 crore. The EBITDA margin also decreased to 12% from 13.2% in the previous year’s period due to rising commodity prices and increased marketing expenses.
Impact of Rising Costs
The operating profit margin was affected by higher commodity prices and marketing costs. Total expenses grew at a faster rate than revenue, increasing by 9.7% year-on-year during the quarter.
Banerjee mentioned that CEAT is facing margin pressure due to significant increases in raw material costs and ocean freight but is addressing these challenges through strategic price adjustments.
Financial Management
"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 stated.
A one-time gain of Rs 7.46 crore was recorded during the quarter, which included a reversal of Rs 11.5 crore related to earlier purchases of licenses for EPR obligations. Additionally, there was a one-time expense of Rs 4 crore due to a voluntary retirement scheme.
Additional Income Sources
Besides the one-time gain, net profit growth was also supported by profits from joint ventures and other income sources. CEAT recorded Rs 5.3 crore as a share of profit from JVs and associates, compared to a loss of Rs 2.4 crore in the same period last year. Other income almost doubled to Rs 6.2 crore from Rs 3.3 crore.
The company’s total expenses rose more rapidly than its revenue during this period, reflecting increased costs associated with commodities and marketing efforts.
Despite these challenges, CEAT managed to maintain robust growth in key segments like replacement markets and exports while strategically adjusting prices to mitigate cost pressures.
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