Financial Performance:

For the quarter ended March 2010, J K Tyres has reported scintillating results with 96% jump in the Net Profit at Rs 26.75 crore over 23% rise in the Total income from operations to Rs 1047.55 crore. OPM contracted by 80 bps to 7.6% and curtailed operating Profit growth to 10% to Rs 79.17 crore. Dip in the interest cost by 40% to Rs 18.67 crore and 15% increase in depreciation to Rs 22.28 crore has drived PBT up by 78% to Rs 38.27 crore. Finally, 650 bps dip in the effective tax rate to 30.1% has boosted Net profit to almost clock two fold rise.

Highlights of the call are:

• On the consolidated front, the company has posted turnaround results with Net Profit of Rs 223.81 crore for FY10 as against loss of Rs 103.92 crore in the corresponding previous year, on 17% rise in the total income from operations at Rs 4584.68 crore. Thanks to sharp jump in OPM to 11.3% and more than 3 fold rise in the other income at Rs 16.38 crore.
• On the standalone front, the company has reported more than 8 fold rise in the Net Profit at Rs 163.47 crore despite 25% dip in the Net sales at Rs 3691.64 crore. OPM expanded to 11.4% and drived Operating Profit up by 35% to Rs 419.51 crore.
• Tonnage for the quarter is around 56,500 MT for the same and for the year as a whole is 2,40,000 MT.
• Price hikes in the quarter under review have increased the top line by 1.5%.
• Overseas subsidiary of the company – Tornel, has capacity of around 66 lakh tyres per annum. The utilization in the passenger radials is around 70-75% and that of bike segment around 60% only. Tornel first quarter sales are up by about 8-10% and the management witnessed pressure on profitability at this facility owing to spike in the raw marterial prices. Except that of some maintenance Capex (USD 5 million), there is no much capex on this facility front.
• The average price of Rubber for the quarter is about Rs 145 per kg as against Rs. 119 per kg in the quarter before, an increase of 22%. Average Price of natural rubber for full year is around 110 per Kg. On the other hand, average price of NTCF is Rs 230 per Kg and that of carbon black at about 54 per Kg for quarter ended march 2010.
• The company has 45 days of rubber inventory at Rs 145 per Kg by end of FY10.
• The company witnesses erosion in the margins owing to spike in rubber prices. However, the only silver lining is that the petroleum product prices have started falling.
• The company has increased the prices for tyres in the exports segment also, by 3-4% in quarter ended March 2010.
• So as to pass on spike in the raw material prices, the company is going to increase prices of its products by 4% across its product basket effective from 1 June 2010 which will be going to partly mitigate the additional cost.
• The company has completed PBR expansion project with Capex of Rs 315 crore in FY10 and that of OTR and PCR expansions amounting to Rs 120 crore and Rs 50 crore respectively. The OTR project is almost ready while the PCR line is expected to be completed by July 2010.
• Besides above, the company has chalked out new project with capex of Rs 930 crore which includes both green and brown field expansion. The Green field plant is coming up in Tamil Nadu with capacity of 25 lakh car radial tyres. This facility is expected to be commissioned in September-October 2011 and the full capacity will be achieved between April and May 2012. The Capex for the green field project is estimated at Rs 776 crore.
• On the other hand, the company has planned to add 2 lakh truck bus radial tyres at the existing facility at Mysore taking its capacity from 8 lakh tyres to 1 million tyres with capex of Rs 154 crore. This plant is expected to commission by February-March 2011 and will achieve whole production by September-October 2011.
• The capex for FY11 will be to the tune of Rs 750 crore.
• The standalone debt as on 31^st March 2010, is Rs 860 crore against Rs 1100 crore last year. The consolidated debt is Rs 1158 crore against Rs 1382 crore last year. On the flip side, cash is books around Rs 50-60 crore.
• The company is comfortable with EBITDA margins of about 10 to 10.5% in FY11.
• Expects volumes to increase by 20-25% in FY11