JK Tyre shares fell to an intraday low of Rs 384.15 on the NSE Friday after the company reported a steep drop in June-quarter profit.

The trigger was a steep fall in profit. Consolidated net profit came in at Rs 44.09 crore for the quarter, down 73% from Rs 163.35 crore in the same period last year. That is a big drop, and it is what spooked investors.

Revenue actually held up fine. It rose 2% to Rs 3,946.24 crore from Rs 3,868.94 crore a year earlier. The problem was on the cost side. Raw material expenses shot up, and that ate into profitability.

Operating profit, measured as EBITDA, fell nearly 36% to around Rs 258 crore from Rs 402 crore a year ago. The operating margin shrank to 6.5% from 10.4%.

Chairman and Managing Director Raghupati Singhania pointed to the ongoing crisis in West Asia as the main reason behind the cost spike.

He explained that close to 70% of the raw materials used in tyre manufacturing are linked to crude oil, which makes the industry sensitive to any disruption in that region. On a brighter note, actual demand for JK Tyre products stayed strong.

Domestic volumes grew 25% year on year, with replacement demand up 12% and demand from vehicle makers jumping 42%. The company said higher value products are also making up a bigger share of sales.

By the end of trade, the stock settled at Rs 394.90, well off its 52 week high of Rs 611.90 and edging closer to its 52 week low of Rs 311.

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