CEAT Limited expects its Camso off-highway tyre business to reach operating profit break-even by March 2027. While the company faces margin pressure from rising raw material costs and cautious replacement demand from commercial vehicle operators, it is betting on strong export growth and client migration to support this recovery.
CEAT Limited has set a clear recovery timeline for its Camso off-highway tyre business, aiming to reach an operating profit break-even by March 2027. The unit, which was acquired for $225 million, has been operating at a loss, but recent financial data shows signs of stabilization. In the September quarter, the unit reported a 35% sequential increase in sales, and its negative operating margins narrowed significantly, dropping from 10% to 2%.
Management has been focused on integrating the business and moving customers over from the previous owner, Michelin. As of the latest update, 85% of this client migration is complete, with the remaining portion expected to transition by December. Success in this integration, along with higher usage of production capacity, is central to the company’s plan to make the unit profitable.
Despite these recovery efforts, CEAT is dealing with significant cost pressures. Raw material costs increased by approximately 9% during the second quarter. While the company raised tyre prices by 12% to 14% since April, these increases have not fully kept pace with the rising costs. This cost environment is particularly challenging because commercial vehicle operators are sensitive to price hikes and have begun delaying the replacement of old tyres, which creates uncertainty in the aftermarket segment. However, the original equipment manufacturer segment remains steady, supported by strong production cycles.
To balance its financials, CEAT is managing its debt and cash flow carefully. The company has planned ₹1,400 crore in spending on expansion and upgrades for the 2027 financial year. It also took steps to improve the health of its balance sheet by converting $24.5 million of loans into equity for its Sri Lankan operations. This move helps manage currency risks and interest burdens.
International operations are currently a key pillar of support for the company. Standalone exports grew 27.4% sequentially in the second quarter and now represent about 20% of net revenue. This export growth provides a necessary buffer for the company against the ups and downs of the domestic market.
Investors will likely track whether the company can sustain its export momentum and manage raw material inflation effectively in the coming quarters. The primary focus remains on whether the cost of raw materials stabilizes and if commercial vehicle operators resume their normal replacement cycle for tyres.