General Tyre and Rubber Company (Gentipak), formed in 1964 is one of the leading producers and suppliers of quality tyres in Pakistan. Originally, the company was established by the General Tire International Corporation (GTIC) of USA. However in 1977, General Tyre USA sold 90 percent of its shares to M/s Bibojee Services Ltd.
The company derives its operational technology from Continental AG, Germany's top most tyre manufacturer, under a long-term technical service agreement. Continental AG is also one of the shareholders of Gentipak. General Tyre has its manufacturing plant situated in the suburbs of Karachi. The commercial operations of the Company started with an initial annual capacity of 120,000 tyres. However, over the years, the company has gone an extra mile to enhance its production capacity that now clocks in at two million tyres per annum.
The company is the producer of multiple ranges of tyres that fall into five broad categories, for example, tyres for passenger cars, light trucks, trucks and buses, tractor front and rear tyres and rickshaw tyres. Recently the company has also indulged into the motorcycle as well. Besides, the company has also launched new featured products such as Euro star, Euro glide and Euro Kompact.
The major domestic customers of Gentipak includes Toyota, Honda, Pak Suzuki Motor Company, Hino Pak, Ghandhara Industries, Ghandhara Nissan, Al-Ghazi Tractors, Millat Tractors, to name a few. Apart from meeting local demand, Gentipak also exports its products mainly to the Middle East countries. The company is also exploring other markets for exports. The company's comprehensive network includes its plant, its head office in Karachi, three regional offices and a network of over 100 dealers spread across the country.
Performance snapshot of FY14 The performance of General Tyre is quite phenomenal over the last five years. From a sale volume of 1.53 million units of tyres in the financial year 2010, the company sold 2.16 million units of tyres during the fiscal year 2014, showing 33 percent year-on-year growth. Regarding its top line the tyre company has shown an impressive growth in its sales.
In FY14, the General Tyre consolidated its motorcycle tyre business that was launched in the last quarter of FY13. In FY14; the Company suffered a 5 percent decline in Original Equipment Manufacturers (OEM) segment. This was visible in the tractor OEMs whose sales had come down due to the increase in sales tax from 10 percent to 16 percent. The replacement market sale, excluding motorbike, was also slightly down to 0.6 percent due to the issue of smuggling. On the other hand, the sale of truck, bus and farm tyres had shown improvement in FY14. In absolute terms, the sale tally rose by 5 percent in year-on-year mainly from the sale of motorcycle tyres and sales mix.
Financial performance FY15 The General Tyre's sales volume has increased by 13 percent year-on-year regarding tonnage during FY15. In rupee terms, the firm's top line clocked-in at Rs 9.4 billion, which is 10 percent higher over last year. The Company produced 2.28 million tyres during the year compared to 2.16 million tyres produced last year, an increase of 6 percent. The tyre company achieved this top line growth by successfully penetrating into OEMs correlated with automobile sector's growth, resulting an increase in volumetric sales and the steady growth in motorcycle tyre segment. In terms of sector wise sale, OEMs in FY15 showed a significant increase. The major increases came from light truck-bias, light truck radial and farm rear, which grew by 73 percent, 64 percent and 21 percent respectively.
Although, the company is performing well it still faces significant hurdles from smuggled and under invoiced tyres. The sales of passenger car tyres in Replacement Market (RM) continue to lag behind due to cheaper under-invoiced, smuggled and used tyres available in the market. It is worth mentioning that Gentipak made into billion rupees pre-tax profit club and made a pre-tax profit of Rs 1,097 million for FY15 compared to Rs 748.2 million made in the previous year, an increase of 47 percent. The Company put a lid on its operating expenses along with low financial charges and increase in top line saw its bottom line grew highest in last five fiscal years and reported a growth of 47 percent in year-on-year.
A look into 1QFY16 While the fiscal year 2015 was certainly a blessing for the tyre company, General's sales volume has kept its head high in the year to date. In terms of tonnage for the period under review, the volumes showed an increase of 22 percent over the same period last year which was also reflected in the growth of top line value that grew by 18 percent.
OEMs were the main contributors to the growth, increasing by 55 percent over the same period last year with the increase came from passenger car tyres, light truck tyres and truck/bus tyre categories. The motor cycle segment also did not lag behind and grew by 47 percent in year-on-year comparison.
Expansion Plans: According to the market sources, General Tyre and Rubber Company is going to invest Rs 1.2 billion in FY16 for expansion in tyre production. The plant is presently capable of producing around 3.1 million tyres, of various sorts. With the expansion, the aim is to increase the tyre production up to 25 percent.
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General Tyre and Rubber Ltd
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Rs (mn) 1QFY15 1QFY16 YoY
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Sales 1,818 2,153 18%
Cost of Sales 1,504 1,710 14%
Gross Profit 315 443 41%
Gross margin 17% 21% Up 400 bps
Administration Expenses 66 58 -12%
Distribution Cost 76 82 8%
Other Income 12 13 8%
Other Expenses 17 31 82%
Profit from Operation 168 286 70%
Operating margin 9% 13% Up 400 bps
Finance Cost 80 26 -68%
Profit before Tax 88 260 195%
Taxation 31 80 158%
Profit after Tax 57 180 216%
Net margin 3% 8% Up 400 bps
Earing pershare 0.95 3.02 -
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