Multiple cost headwinds for tyre makers; week rupee may wash profitability
Tyre stocks are down by five to 11 per cent over the past month on input cost worries. Natural rubber (NR) prices in India have moved up by eight per cent over the past four months, on supply issues, including the impact from floods in Kerala. The price in rupee terms of imported rubber has risen by four per cent in the same period, due to the rupee's sharp depreciation. About 40 per cent of the sector's requirement is from import; with the home supply disruption, analysts expect this to move to 50 per cent for 2018-19. K Srikumar, vice-president at ratings agency ICRA, expects domestic NR prices to increase by five to 10 per cent over the next two quarters, to Rs 135-145 a kg. NR is a little over a third of tyre makers' input costs.The impact on companies' margins depends on factors such as scale, product mix, geographical mix and price of crude oil derivatives. Srikumar says a 10 per cent rise in NR prices (other things remaining the same) could result in a 300 basis points (bps)...11-09-2018