Ceat scales back TBR investment to align with market outlook

New Delhi – Ceat Ltd is scaling back its truck & bus tire expansion plans following the onset of challenging market conditions in the third quarter (Oct-Dec 2021), according to managing director Anant Goenka.

On a 20 Jan conference call, Goenka said the Indian tire maker will complete the ongoing INR7 billion (€700 million) phase 1 of the TBR expansion at its Chennai factory “in about a year”.

To "align Capex with market outlook," the company however plans to “indefinitely postpone” the INR5 billion phase 2 of the project, which was originally disclosed in July last year.

According to Goenka, Ceat will go ahead with its INR1 billion expansion plans for off-highway tires [OTH], also originally disclosed last summer.

“Strategically we have decided to increase our focus on the OHT segment… [and] intend to complete this downstream capacity expansion,” he said.

The expansion plan in Ambernath, India will raise Ceat’s current OHT manufacturing capacity to 80 tonnes per day from the current 50 tonnes per day in the first phase.

Over a 12- to 15-month period, production capacity will reach 105 tonnes per day, Goenka added.

Overall, the Ceat official said the company was revising its growth Capex guidance to about INR 8 billion in the financial year 2022 (ending 31 March), down from INR 10 billion reported earlier.

In the next financial year, the figure is being reduced from INR7.5 billion to INR7 billion, he said.

Ceat reported a INR200 million loss in the third quarter, with sales marginally up from the previous year at INR24 billion.

“Third quarter this year has been unusually challenging for the industry, primarily due to slowing domestic demand and unabated cost pressures,” said Goenka.

''We are witnessing muted demand in the replacement segment due to tepid consumer sentiment, higher fuel prices and a softer uptick in India's rural markets,” he added.

In addition, the ongoing semiconductor shortages impacted the tire maker’s OEM passenger segment sales, according to Goenka.

''We are taking necessary corrective actions to cut costs and are looking at appropriate price increases going forward,'' Goenka said.