Tyre industry expects growth in sales

Voices hope entry of new automakers will lead to higher demand for tyres

KARACHI:

The entry of new automobile companies in Pakistan has raised hopes for the domestic tyre businesses, which expect a good growth in sales as the auto sector expands.

Plagued by smuggling, the tyre industry now expects a steep growth in sales, officials of The General Tyre and Rubber Company of Pakistan said at a corporate briefing on Wednesday.

“The company expects demand for local tyreshttps://tribune.com.pk/story/2288447/efforts-to-curb-tyre-smuggling-bear-fruit to climb following the setting up of new vehicle assembly plants coupled with government’s initiatives aimed at curbing smuggling,” stated a report released by Taurus Securities.

Under-invoicing and smuggling of imported tyres dent sales of locally manufactured tyres. Taurus Securities Mustajab Ali Kazmi pointed out that the management of the company intended to improve sales in the tyre replacement segment and had introduced new designs. The company was also focusing on enhancing exports, he said.

The tyre manufacturing firm exported Rs93 million worth of products to various countries in the first half of current fiscal year 2020-21, he said. The replacement tyre segment accounted for 62% of the company’s topline while the rest came from the original equipment manufacturers (OEM), he stated in the report.

Total market share of the company in the replacement market hovers around 25%.

During the corporate briefing, the management said that the company was constantly working to improve its products and operational efficiency. The company has recently acquired financing under the Temporary Economic Refinance Facility (TERF) and plans to introduce off-road tyres and crossover tyres in future, the analyst said. Term margins for the firm were expected to stay around 13-15%, said Kazmi.

The tyre company posted an after-tax profit of Rs406 million with earnings per share (EPS) of Rs3.33, up 13.9 times, in the first half of fiscal year 2020-21 compared to the same period of previous year.

In the second quarter of 2020-21, the tyre company reported a profit of Rs278 million (EPS Rs2.3), up 21 times year-on-year.

Sales revenue reached Rs6.45 billion, up 41% year-on-year mainly on account of increased volumes in the replacement market and better OEM sales with support from increased auto financing.

Gross margins rose to 17.6% in the first half of FY21 compared to 16.4% in the same period of last year.

Published in The Express Tribune, March 25^th, 2021.

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