2-wheeler demand to grow, commodity costs to come down, says CEAT CFO Kumar Subbiah

RPG Group-owned tyre manufacturing company CEAT has revealed that it expects demand for two-wheelers in the country to pick up in the Jan-Mar quarter of 2023 financial year (Q4 FY23). Kumar Subbiah, Chief Financial Officer (CFO) of CEAT, in an interview with CNBC-TV18, said, “As far as quarter four is concerned, quarter on quarter we expect two-wheelers to grow.”

Subbiah also added that commodity costs could go down by 2-3 percent in Q4. He said, “In the last two quarters, our EBITDA margin has improved from 6 percent to 8.7 percent. So about 270 basis points (bps) improvement. Commodity cost cooling off has played a role in terms of improvement in margins. We have indicated that commodity cost could go down by about 2-3 percent in quarter four.”

While talking about future expectations, he stated that “We are not very far from 10 percent at this point in time, we are at 8.7 percent so our internal target is always to reach to double-digit number. There is a good probability of reaching that number in quarter four.”

Subbiah also explained the rising cost of raw materials and its impact on the company’s business. He said, “Natural rubber prices have moved up by about $100 in the last two weeks in the international market. So therefore we will have to wait and watch. We will not like to come to any conclusion based on what has happened in the last one-two week. Therefore, beyond a 2-3 percent drop in quarter four, we are not able to give any view.”

He further stated that the CEAT’s exports are also continuously facing headwinds, especially in Europe. Subbiah said, “Exports continue to face headwinds as we had earlier shared in Europe and also other parts of the world. So that is putting pressure. The quarter four outlook is little better than quarter three. But considering the world is likely to go through a recession and Europe's recovery is still not very clear, exports could still be a little bit under pressure.”