CEAT Limited (NSE:CEATLTD) Q3 FY23 Earnings Concall dated Jan. 25, 2023.
Corporate Participants:
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar Subbiah — Chief Financial Officer
Analysts:
Ashutosh Tiwari — Equirus Securities — Analyst
Siddharth Bera — Nomura — Analyst
Ajay Surya — Niveshaay — Analyst
Pooja Rathi — YellowJersey Investment Advisors — Analyst
Chirag Shah — — Analyst
Mitul Shah — Reliance Securities — Analyst
Sumit — ASK — Analyst
Rishi Vora — Kotak Securities — Analyst
Vishal — — Analyst
Saket Kapoor — Kapoor & Company — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to CEAT Limited 3Q FY ’23 Earnings Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ashutosh Tiwari from Equirus Securities. Thank you and over to you sir.
Ashutosh Tiwari — Equirus Securities — Analyst
Thanks, Aman. Good evening, everyone. On behalf of Equirus Securities, I would like to welcome you all on the CEAT Limited third quarter FY ’23 conference call. From the management side, we have Mr. Anant Goenka, Managing Director; CFO, Mr. Kumar Subbiah, and members of IR Team. First of all, I would like to thank the management for giving us the opportunity to host this call.
Without further ado. I would like to hand over the call to Mr. Goenka, for opening remarks.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you, Ashutosh. Good evening, everyone, and a very warm welcome to CEAT’s quarter three FY ’23 earnings call. I am Anant Goenka, and I have with me our CFO Kumar Subbiah on the call with us. We wish you a very happy, healthy, and prosperous ’23, and as usual we will start with brief remarks from myself and Kumar, post which, we will take up Q&A.
Quarter three is generally a seasonally weak quarter for us, particularly in passenger segments, on the domestic side. We saw a similar trend this time as well. Volumes for quarter three were lower by about 6.5% on a quarter-on-quarter basis. October being the festive month was particularly low. November onwards, volumes have been improving, and demand should give some more momentum as we progress into quarter four. On a year-on-year basis, OEM has been the fastest-growing segment coming from a low base. Exports have been adversely impacted by macroeconomic headwinds across geographies. However, we believe demand will improve going forward.
Some of our recent launches have seen a good response. The forex situation is also stabilizing in many of our export destinations and channel destocking has played out, and the order book is improving going forward. We are confident in the medium to long-term potential of our international business, and continue to invest disproportionately on product as well as market expansion. As the macro headwinds subside, we are hopeful of achieving the same growth in this vertical.
In terms of demand outlook, the domestic situation seems to be steady. Inflation has moderated. Key high-frequency indicators are stable. Government spending is expected to increase on the back of buoyant tax collection, rural sentiments are also expected to improve with better rabi output. Growth may moderate, but we do not see any major downside risk in the near term. On the export side, apart from the ongoing geopolitical situation, recession may also playout in the Indian economy. However, given our positioning in international markets and target segments like agriculture, the impact should be limited.
With respect to margin outlook — margin performance and cost outlook, the raw-material situation has been benign as expected. Crude inched up during the quarter, but it’s hovering around $80 to $90 per barrel. Rubber, softened a bit further. However, domestic availability was a challenge as producers were holding inventory. Our commodity basket costs reduced by about 4% versus quarter two, slightly better than what we had guided. As a result of beneficial RM and lag effect of earlier price increases, our gross margin expanded by 219 basis points. Some of this gain was offset by lower volume and increase in employee costs due to increments. Hence, our standalone EBITDA margin expanded by about 160 basis points over quarter two, to reach 8.7%.
Versus our current purchases and pipeline, we expect raw material basket to further decline by about 2% to 3% in quarter four. We are monitoring the situation closely. Near-term global economic outlook will keep a check on commodity prices however, and with China coming back, post-COVID impact will be a key variable to watch out for.
With respect to capex, we are sticking to the FY ’23 capex guidance of about INR750 crores plus maintenance capex. Since we have largely completed all our announced capex in PCR, TBR, two-wheeler, our capex requirement for FY ’24 will reduce. We are fine-tuning our working. However, as per initial estimates, we’ll be spending about INR550 crore as growth capex in FY ’24. Major part of this will be towards the off-highway expansion that we had announced last quarter and some balance portion of Chennai PCR. We will get back with a refined number in our quarter four call. The off-highway capex of about INR395 crores is expected to be completed by December 2024, and we are hopeful of global macroeconomic situation stabilizing by then. We would have also expanded our reach and product range, which will further help achieve optimal utilization in a reasonable timeframe.
We launched our SUV platform Crossdrive AT with an aggressive all-terrain pattern. We are also proud to be frontrunners on energy efficiency. So far, 38 of our products have received a BEE 5-star rating. To supplement that, we launched a media campaign, along with our brand ambassador Aamir Khan current to spread awareness about the energy efficiency of our tires.
From the manufacturing side, we are proud to be the first tire company in the world to get Lighthouse certification from the World Economic Forum for our Halol plant. This certificate is given to a select group of companies around the world, who have seen substantial efficiency of quality improvement using Industry 4.0 technologies such as IoT, sustainable production, artificial intelligence, data sciences, etc. We have been on this journey since the last few years and undertook multiple digital transformation projects and we have started reaping various benefits such as higher productivity, lower wastage, lower energy consumption and higher use of green materials in our Halol plant. We will be implementing this in other plants as well.
On ESG, we continue to make remarkable progress. Apart from the 5-star ratings I mentioned earlier, we have also reduced our water consumption per ton of production by about 25% year-on-year. Other initiatives like ultimate transport, renewable parts, tire weight, rolling resistance continue to make good headway. Overall, as the quarter saw further margin recovery, we expect this to continue into quarter four as well. As gross margin normalizes, we will be able to demonstrate meaningful gains from operating leverage, premiumization, digitalization, and cost optimization initiatives going forward. Lower capex and hopefully better margin will further strengthen our balance sheet, cash flows, and return profile in the coming year.
With this, I hand over the call to Kumar.
Kumar Subbiah — Chief Financial Officer
Thank you, Anant. Good evening, ladies, and gentlemen, and thank you for joining us for our quarter three FY ’23 earnings calls. I will share some further financial data points with you, post which, we can enter the Q&A session.
With respect to revenue, our consolidated net revenue for the quarter stood at INR2,727 crores, a year-on year growth of about 13%, contributed by both mix of both price and volumes. In the first nine months, our consolidated revenue stood at INR8,440 crores, a growth of about 24.7% over the first nine months of the last year. Coming to gross margin, our gross margin for the quarter expanded by about 200 basis points over quarter two, largely driven by lower raw material costs. Our vendor raw material costs declined by around 4% over quarter two. The expansion of gross margin is the main contributor for the improvement in EBITDA margin, to the tune of about 170 basis-points in quarter three versus quarter two. The drop in raw material cost was largely contributed, as Anant mentioned, due to drop in the prices of crude derivatives, as well as natural rubber.
Coming to our capex, total capex outflow during the quarter at a consolidated level was about INR218 crores. That includes both project as well as routine maintenance capex. Our total capex outflow stood at INR679 crores in the first nine months of the year, which is largely in line with our full-year capex plan of about INR900 crores.
Coming to working capital, during the quarter, we took multiple initiatives to bring down our overall inventory to the tune of about INR290 crores that helped in augmenting our operational cash flow, improving the quality of working capital, and also on reducing the dependence of debt to fund our capex. Our overall consolidated debt increased by about INR38 crores during the quarter, and our debt level at a consolidated basis stood at INR2,341 crores as of end December.
Operational expenses apart, our employee cost increased by about 10% quarter-on-quarter, due to impact of annual increments, and also some new wage settlement in one of our factories, while other expenses declined due to lower volumes, and efficiency improvement measures. Overall, our operating expenses were lower by about 5% quarter-on-quarter, partly due to lower scale of operations and balance due to tight cost control exercise during the quarter.
An update on Sri Lanka. Sri Lanka continues to see challenges, while volumes saw some improvement due to inflation and change in the income tax, both for corporate and individuals from 18% to 30% effective first October 2022, contributed adversely to the tune of about INR6 crores in PAT. Depreciation was at similar levels for the last quarter. Our interest expenses went up by about 14% during the quarter, largely due to increase in interest rates, and a slightly higher level of average debt during the quarter.
I would like to give you an update on ongoing case with Competition Commission of India. Earlier this year, we had received an order from Competition Commission, imposing a penalty on some other Indian tire companies. The penalty on CEAT was about INR252 crores. We filed an appeal against the order before NCLT. NCL in its order dated December 1, has remanded the order back to Competition Commission of India, for reconsideration and NCLT has also observed errors in the CCI order, leading to possibly a wrong conclusion. We are happy to inform you during the quarter, Credit rating agency CARE Ratings carried out risk assessment and they have reaffirmed AA long-term rating and A1+ for short-term with outlook maintained as stable. Overall, our standalone EBITDA stood at INR237 crores, with a margin of 8.73%, an expansion of 160 basis points over the previous quarter, and 323 basis points improvement over the same quarter of last year. Our consolidated profit after-tax for the quarter stood at INR41.04 crores, which compares well with INR5.8 crores reported by us in quarter two.
We can now open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] First question is from the line of Siddharth Bera from Nomura. Please go ahead.
Siddharth Bera — Nomura — Analyst
Yeah. Hi sir, thanks for the opportunity. Sir, my first question is on the volume. So, if we look at in the current quarter, can you please elaborate a bit more on how has been the growth on the overall basis compared to last year same quarter, and if you can break it up into other segments also?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right. In terms of overall growth, our volumes have grown in single digits, low-single digits. The value has grown at strong double-digit levels because of inflation. Most of this growth has come from high-growth in OEM. Replacement has generally been flattish and exports has seen some amount of negative growth in volume terms on a year-on-year basis. So, largely what we’re seeing is, two-wheeler market in OEM is clearly seeing some amount of stress and pressure at this point, particularly on the motorcycle side. Rural markets are still to come back to normalcy. And for us, motorcycle is an important segment, which is seeing some — relatively some stress.
With respect to truck and bus segment has seen very strong growth on the OEM side because last year itself was a very low base. PCUV has generally seen good growth on a year-on-year basis, on a quarter-on-quarter basis. Also, there has been just about marginal growth led by UV segment. So, we are seeing the higher categories doing relatively better. The base categories not performing as well because of high inflation impact on sales, two wheelers, motorcycles, and low value vehicles.
Siddharth Bera — Nomura — Analyst
Got it. Sir, on the replacement side, possible to elaborate on the growth across TBR, and two-wheelers, especially for the replacement segment?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So, in value terms or volume terms?
Siddharth Bera — Nomura — Analyst
In volume terms, sorry.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So, on a year-on year basis, replacement, as I said, has been flattish, TBR has been flattish, but — I sorry, truck and bus overall has been flattish, but off-highway tire segment has grown very well, 30% type growth levels. Two-wheeler has seen some negative growth as I shared, and PCUV has just seen single-digit kind of growth because of — whereas more of that growth has come from UV in double-digits, whereas passenger car has been flattish on a year-on-year volume basis.
Siddharth Bera — Nomura — Analyst
Understood. So, sir, I mean, now the point is, in general, [Indecipherable] entry level segments demand still impacted. So, under this backdrop, how do you expect the growth to behave in the coming quarters? Do you expect some improvement from the current levels or are you picking up in terms of — at the ground, in terms of outlook?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, we are seeing — we are quite — we are optimistic about demand. There will not be a sharp uptick or anything, but there should be steady growth. I’d say, early part of January has seen some challenge on the CV side with north and parts of east slowing down because of extreme climate conditions, but I think from Feb onwards, things should bounce back. I think with a good rabi crop, rural demand also should get better and the inflationary impact at some point, two-wheeler also, I feel, has relatively bottomed out. We know we can see the results of other two-wheeler players where really demand has come down over the last few years’ time. So, I don’t see too much of drop.
On the EV side, we are relatively strong, and we’ve established a very strong market share with presence in over 70% models. And as two-wheeler EV picks up, we will be in a much better position, to gain in the market as well. I think, PCUV demand on the OEM side will be good in quarter four with multiple models having a sharp, I mean, very high waiting list in that sense and our acceptance in OEMs is consistently going up across all categories, particularly in UV all [Phonetic] segment, commercial segment. These were little bit weak for us, but I think things are getting much better as we see. Surprisingly on the export side, there’s a lot of concern on recession, but I think we also expect export to have bottomed out in quarter four, and things should see a little bit of steady growth in quarter four versus even quarter three. It’s a little bit of a farming good demand season as well. So off-highway tire will also see slightly better growth.
And the geopolitical issues, currency fluctuation, while they remain in few clusters, it has got better in certain areas. Brazil is holding up well. So, I’m a little bit more optimistic in quarter four versus quarter one.
Siddharth Bera — Nomura — Analyst
Understood, sir. Sir, second question is on the pricing side. So, was there any price increase in the current quarter or in the current month, in current Q4, or any price changes you have done in the process?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
There were some small price increases under 1% on average across the board. So, on the buyer side about 1%, 1.5% price increase, UV, there was an increase of about 1.5%. So, overall, small price increases, but we expect this to now stabilize with inflationary pressure also coming down.
Siddharth Bera — Nomura — Analyst
Understood. But sir, on the commodity side, which you have said that you have 2% to 3% further improvement in Q4. I am assuming this will be largely led by lower commodity realizations which you are getting, but given that demand remains weak, do you think there will be requirement, especially to support demand by some discounts or incentives?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, I don’t think so. I think we still have some catching up to do to reach double-digit margin. Unless there is some competitive action that happens, we may have to respond, but at this point. I don’t see any decision or view on taking price drops or discounting at this front.
Siddharth Bera — Nomura — Analyst
Understood, sir. Thanks a lot. I will come back in the queue.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Ajay Surya from Niveshaay. Please go ahead.
Ajay Surya — Niveshaay — Analyst
Hello. Am I audible?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yes. Good evening, Nivesh [Phonetic].
Ajay Surya — Niveshaay — Analyst
Yeah. So, congratulations on a good set of numbers. My question is regarding the debt levels. So, currently you stand around INR2,300 to INR2,400 crores debt level, on consolidated basis. So what would be the repayment schedule in coming two years, three years.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar, would you like to take that?
Kumar Subbiah — Chief Financial Officer
Okay. No, INR2,300 has a combination of both long-term and short-term. From long-term point of view, in terms of repayment would be to the tune of about INR300 crores next year, but that does not mean it would translate to reduction, drop in debt level because we still have undrawn limits in the overall sanctioned capex. So, we don’t have any pressure in terms of cash flow with respect to repayment of long-term debt, and we mostly look at our total debt. And in the event there is any obligation with respect to repayment of long-term debt in one of the long-term debt instruments, we also have undrawn long-term debt which you would exercise.
Ajay Surya — Niveshaay — Analyst
Okay. My next question is regarding the overall industry has gone through a significant capex in last four, five years. So, do we see any oversupply in the industries in coming years?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, I don’t think so. I think everyone who has taken capacity increases in their own respective segment. For us, we have over-invested in the passenger side, where we want to gain market share, whereas on truck, we have been fairly conservative. We have also gone strong on OHT segment. On two-wheeler, we have hardly done any investment, whereas market has seen negative growth. And as I’ve shared in my past calls as well, the market itself has seen a fair amount of contraction, particularly in the passenger side in the last three years, four years. So, if you look at the longer term, one year, two years, three years, we feel that the overall sector has to bounce-back, and we are ready for that at least.
Ajay Surya — Niveshaay — Analyst
Okay, thank you, and that’s it from my side.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah.
Operator
Thank you. Next question is from the line of Pooja Rathi from YellowJersey Investment Advisors. Please go ahead.
Pooja Rathi — YellowJersey Investment Advisors — Analyst
Hi. Thank you for the opportunity. My question is in line of capex only. So, I just missed out that your capex is in this segment primarily.
Operator
Ma’am, may I request you to please use the handset. The audio is not very clear.
Pooja Rathi — YellowJersey Investment Advisors — Analyst
Now it’s clear?
Operator
Yes, yes, better now.
Pooja Rathi — YellowJersey Investment Advisors — Analyst
Thank you for the opportunity. So my question is, the capex for CEAT, like, we had a talk on industry-wise, but for CEAT, which are the primary segments that you are looking?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right. So for us, the primary segments from a capex perspective that is pending is some of the downstream equipment of passenger car in Chennai, and off-highway tires, we had announced in the last quarter just about INR400 crores. So, these are the two capexes that would be a large, and then largely, it is the latter half for the balance capex that is left of all the other categories, but largely these are the two categories that will come in, in the next year.
Pooja Rathi — YellowJersey Investment Advisors — Analyst
Okay, okay. Thank you.
Operator
Thank you. The next question is from the line of Chirag Shah from [Indecipherable]. Please go ahead.
Chirag Shah — — Analyst
Hello?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Good evening, Chirag.
Chirag Shah — — Analyst
Hi. Sorry, I joined little late. Just wanted to understand your comment on commodities, what happened in the quarter, and how are you looking at ahead from next quarter perspective also, and slightly from next year perspective also?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar, would you like to take that?
Kumar Subbiah — Chief Financial Officer
Yeah, okay. Chirag, in the last quarter, our overall raw material cost came down by about 4%, okay. In the beginning of the call, we indicated that we expect in quarter four raw material cost to go down 2% to 3% over quarter three. So that is the outlook that we have, as far as quarter four is concerned. Beyond quarter four, it entirely depends on what happens to crude and other materials. So, the immediate term outlook is this.
Chirag Shah — — Analyst
So on this, [Technical Issues] last quarter and in the Q4 is more driven by rubber or more driven by crude derivatives?
Kumar Subbiah — Chief Financial Officer
No, it is a combination of both, both crude as well as natural rubber.
Chirag Shah — — Analyst
Okay. Sir, second question was, historically, we have seen that with a lag, industry tends to pass on the benefits. We always hope that we would be able to retain it. So, is there a change that you foresee this time that there is more sanity as compared to the past in the industry, and how do you look at your margins as well as profitability in general?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah, so, if you look at in last 10-year cycle, there was a drop in raw material pricing that happened from, say, 2010-2011 to 2015-2016, or ’17 or so. At that time, I think, the industry was able to maintain prices and it caused margins to go up. I think it’s difficult to give an answer what will happen going forward, but there’s been a fair amount of capex that has been, at least from CEAT’s side and we will aim towards double-digit margins in the long-term.
Chirag Shah — — Analyst
Okay. And one housekeeping question if I can ask, what was the volume growth for the quarter?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So, volume growth was, on a year-on-year basis — just a second. I think it was about — year-on year basis, overall, was at about low-single digits.
Chirag Shah — — Analyst
Low-single digits. So it is low-single digit of 5% right?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah.
Chirag Shah — — Analyst
Okay. And last question is on the off-highway tires. If you can just share some updates in terms of ramp-up, in terms of SKUs, and in terms of market given the way the so-called macro headwinds are playing out?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right. So, we’re still seeing good growth in the off-highway tires segment. I’d say that from a seasonality perspective, see, this is a weak season, but quarter four should be better. Replacement picked up well in terms of growth from quarter two to quarter three. Exports has seen some amount of headwinds at this point of time, but we are quite optimistic about quarter four onwards. So, we will see better growth in quarter four. US is doing well. The demand slowdown there is less than EU. And from Feb onwards, we clearly expect things to get better because we are continuously expanding our range. We have about close to 700 SKUs across the board, which covers more than 80% of the products that are needed. So, we continue to remain optimistic on the off-highway tires. There has been some slowdown in the international business, but not the fear and the overall recessionary impact that you’re hearing off in Europe, agricultural segment get much less affected.
Chirag Shah — — Analyst
Thank you. Thank you very much and all the best.
Operator
Thank you. The next question is from the line of Ashutosh Tiwari from Equirus. Please go ahead.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah, hi. Firstly on this working capital, Kumar, you mentioned that inventory has come down [Indecipherable] INR290 crores in this quarter versus the second quarter?
Kumar Subbiah — Chief Financial Officer
Yeah, true. It’s right.
Ashutosh Tiwari — Equirus Securities — Analyst
So, was the reduction in the payables as well because debt has still increased marginally quarter-on-quarter?
Kumar Subbiah — Chief Financial Officer
Yeah, there was an equivalent amount of reduction in payables also. So therefore, our net working capital level, the working capital was very similar to as of end September, but the quality of working capital improved. Generally when you reduce inventory, the impact on payable comes with a lag of two and three months. What you pay in quarter three is actually what you received in quarter two, largely. Similarly, the reduction initiatives that we took in quarter three, the benefit of that in terms of payables will happen in quarter four. Another thing, approximately at standalone basis, the debt moved up by about INR50 crores against INR218 crores of capex. So, balance INR168 crores came from our own internal accruals only, in term for funding our capex.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah. And working capital, how should one look at in this quarter, like, say, will it inch up in fourth quarter or will it remain broadly stable?
Kumar Subbiah — Chief Financial Officer
See, quarter four generally tends to be — we will have a higher level of activities. So, in quarter three, normally, the operational — the scale of operations is lower than rest of the year. So, you can afford to bring your inventory down. There’ll be a reduction in your overall receivables. In quarter four, we will have a little more receivables. We will have to operate at a higher level of inventory because of higher demand in March and April. So, we expect increase in working capital, particularly the current asset side in quarter four, and maybe there will be increase in current liabilities also will upset part of the increase in current assets. So, overall, we’ll operate at a higher level of working capital, excluding stables.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. And next year, we guided out INR550 crores of project capex and then plus maintenance, and considering better margin, is it fair to assume that debt probably now near the peak, at current levels?
Kumar Subbiah — Chief Financial Officer
No, I think, INR550 crores, there will be some routine capex and maintenance capex that we have. It depends on that. It is possible for that — to maintain the debt, say, the margins remain at a double-digit level. So, I think it depends on the margin. So, it’s better to wait, get into the next year, and then provide some kind of an outlook with respect to date. But as of now, we are getting into an year where we would be spending less capex compared to the current year. So, it should have a positive impact on debt. Whether it will translate to any drop in debt, or marginal increase in debt, would entirely depends on operating cash flow where the strong linkage to margin. So, it looks may not be very significantly [Technical Issues].
Ashutosh Tiwari — Equirus Securities — Analyst
Can you share what is utilization level currently in PCR and TBR segments, capacities?
Kumar Subbiah — Chief Financial Officer
In case of TBR, we are — our operating — currently our utilization level in the quarter was about 80% to 85% level. PCR is also at a similar level.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay. And is there a possibility if debottleneck capacities abate in PCT, TBR, or we probably are at full right now?
Kumar Subbiah — Chief Financial Officer
No, TBR, currently our capacity utilization is less than 100% only because of the debottlenecking exercise that we carried out last year. So, whereby the capacity of TBR at Halol factory went up from 110,000 tires to around 130,000 tires. That is the main contributor. So, that work has already happened. In case of PCR, we have enough capacity between our Halol factory and Chennai factory. There is no immediate plan to debottleneck PCR capacity, considering that we already have adequate capacities to meet the demand.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay and this softness in exports, while you also mentioned that OTR is doing well, off-the-road tires is still doing well, so is it, like, PCR was soft in recent times like last quarter?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So we are seeing a slowdown across the board, if you look at quarter-on-quarter numbers, including off-highway tire. But we’re overall optimistic that maybe this quarter may have bottomed-out in terms of exports. That’s what we wanted to say.
Ashutosh Tiwari — Equirus Securities — Analyst
And how is the pricing environment in export markets? Is it stable or [Speech Overlap]?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So pricing environment has been positive. Right now, with demand slowdown, maybe, we don’t see any increase in prices happening, but it’s been similar to replacement market in terms of price shifts.
Ashutosh Tiwari — Equirus Securities — Analyst
And lastly, based on this two-wheeler replacement, how is that doing right now in India?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Two-wheeler replacement is largely flattish at this time or still seeing some slowness. Scooter is doing a little bit better, but motorcycle is quite slow at this point of time. So it’s — overall, that’s the one market which has seen negative growth actually, I would say, across, yeah.
Ashutosh Tiwari — Equirus Securities — Analyst
Replacement as well?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Replacement too, yeah.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay, okay. Okay, thanks. That’s all from my side. Thank you.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah.
Operator
Thank you. The next question is from the line of Mitul Shah from Reliance Securities. [Operator Instructions] Mr. Shah, over to you.
Mitul Shah — Reliance Securities — Analyst
Good evening. Yeah. Good evening, sir and thank you for giving opportunity.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Good evening.
Mitul Shah — Reliance Securities — Analyst
Sir, first question on raw material basket. Sir, if you can give this prices during the quarter, average prices, rubber and other items per kg basis?
Kumar Subbiah — Chief Financial Officer
Over…
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar?
Kumar Subbiah — Chief Financial Officer
Yes, Anant, I will respond. No, overall, for us, at the consolidated level, raw material bulk cost came down by about 4% in quarter three versus quarter two. And this is after factoring in the adverse impact of currency, okay, and so the net is about 4%. And outlook for the next quarter, quarter four, is at anywhere between 2% and 3% kind of a drop we are expecting in quarter four versus quarter three.
Mitul Shah — Reliance Securities — Analyst
Yeah, that you highlighted earlier. Sir, my question is on per kg basis, if you can give some absolute numbers rubber and any other items, whatever you can share.
Kumar Subbiah — Chief Financial Officer
See, the natural rubber prices in the beginning of quarter three was in the range of INR165 to INR170 per kg, okay, and in the local market. And international market was about INR160 and INR165 range, okay. And towards the end of the quarter, that INR165 became INR140 to INR145. And international market from — came down to INR140 to INR145. There also, it’s more or less at that level, that range in which the beginning to end of the year — beginning to end of the quarter movement was. In case of all other raw materials, synthetic, rubber derivatives, the decline was very slow and happened every month 1% to 2%. And in terms of that reflecting in the final product prices, it took about at least 1 to 1.5 months kind of a lag was found. So they’re also, like for example, synthetic rubber prices moved down from, say, $2,000 level to $1,800, $1,850 in the international market. I’m saying, starting to end, average would be little lower. And similarly, [Indecipherable] prices also at a similar level drop we saw from beginning to end of the year — end of the quarter.
Mitul Shah — Reliance Securities — Analyst
Okay, sir. Second question to Anant sir. Sir, regarding the replacement demand, even after more than now year or 1.5-year base has been low. Still why it’s taking so much time this time for revival demand? Across the segments, it remained very slow. Is it related to anything to affordability or any change in the replacement cycle or with a better quality, replacement is getting elongated?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right, so I think largely it is inflation that has had maximum impact, whether it is across the board, there is a fair amount of pressure on the NIM consumer at this point of time, led by rural demand, which we can see in two-wheeler motorcycle demand impact that we’ve seen in OEM as well as — and therefore, I would say, it also comes down to the replacement segment or is an indicator. I’d say that has been the biggest shift or impact in terms of demand.
Mitul Shah — Reliance Securities — Analyst
Sir, among the all these segments, which segment do you think will revive first in replacement?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
I think the least impacted segment has been the truck, bus segment. It has already gone through some amount of slowdown in the last few years. Also, we are seeing this — I mean, in the last, say, six months, the chip shortage has gone away, so that has resulted in good OEM supplies also into the market. I’d say, going-forward, I’m optimistic about PC/UV, particularly UV demand getting strong. And I would say, the other would be two-wheeler over time should also pickup because base effect will be quite low at this point of time. I’d say, going-forward, the base itself will result in higher growth.
Mitul Shah — Reliance Securities — Analyst
Sir, lastly, on export side. Which geographies do you think would give growth going forward? Right now, though it’s subdued for maybe for a quarter or so, will remain like this? And within export markets also, which segment do think will be adding growth going forward?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right. So for us, Brazil has stayed strong at this point of time and continues to look optimistic. The other two geographies where we have invested in are US and Europe. For us, these are going to be two continuously growing markets. I would say, Europe may continue to stay slow for maybe another quarter, but things should get better after that because we have enough new tires and new ranges that we have launched for both these markets. So these are the three geographies that we are more optimistic about.
Mitul Shah — Reliance Securities — Analyst
And within this, segment wise, any outlook?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah, this is largely passenger segment and truck radial segment, both. Truck is on a very low-base, so we will see good growth. But passenger segment is the area where we’ve done larger investments in terms of coming out with a range, testing those tires, and then launching them in these respective markets.
Mitul Shah — Reliance Securities — Analyst
Thanks and best of luck, sir.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Sumit from ASK. Please go ahead.
Sumit — ASK — Analyst
Hello, am I audible, sir?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yes. Good evening, Sumit.
Sumit — ASK — Analyst
Yeah, good evening. Sir, just wanted to check one thing which is more on export. While we remain pretty positive on that area, is it for CEAT or that’s for market as a whole?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
This is…
Sumit — ASK — Analyst
I mean, because we are increasing range, the base is small for us, so that is driving growth for us or it’s market improvement that we are seeing?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
I can tell you for us. I don’t have enough input on specifically the market, but I would say for us, we are seeing some amount of seasonal impact. Mainly, off-highway tire is a very important part of our demand and we are seeing that by Feb-March demand in — they need to fill-up their warehouses by quarter one, so they place orders by quarter four. So as a result of that and our various SKU increases that we’ve done, we are quite optimistic. So I’d say, it’s more for CEAT. I don’t have a response on how others will get affected.
Sumit — ASK — Analyst
Sure. This was useful. Thanks a lot.
Operator
Thank you. The next question is from the line of Rishi Vora from Kotak Securities. Please go ahead.
Rishi Vora — Kotak Securities — Analyst
Yeah, thank you for giving the opportunity. First thing on this commodity basket, so if I assume that commodity, our current commodity prices stay at this levels, do you expect any more benefit to come through in first quarter as well or fourth quarter is where we get the complete benefit of current RM basket?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar?
Kumar Subbiah — Chief Financial Officer
Yeah. See, the benefit of quarter four, which we indicated 2% and 3% is largely, it considers all other commodity drop that we have witnessed till December. In fact, in the last three, four weeks’ time, we are seeing some increase in the prices of commodities. International natural rubber prices have moved up the range of $80 to $100, okay. Crude is also now operating at $85 to $90 kind of a range, more in towards the $87, $88. So if commodity prices stay where they are as of today, okay, then we don’t see an incremental positive impact in quarter one over quarter four, unless some changes happen in terms of derivatives spread, okay, or some drop in any one other commodities. Otherwise, we are not seeing that.
Rishi Vora — Kotak Securities — Analyst
Understood. My second question was on replacement segment demand. My understanding was that, after the first wave of COVID and even second, we had seen a very strong rebound in replacement segment demand, at least on the consumer like on two-wheeler and PCR segment. So my sense is base would be pretty good, right? Like, last two, three years, we have — would have seen some growth in the replacement segment for these two segments. Is my assessment correct or is there something I’m missing out?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right. So I think the base effect would have only come in quarter one on quarter one growth of last year. From quarter two of FY ’22, things resumed to normal growth. So on a year-on-year basis, you will see decent growth or, say, even on YTD basis. But on a year-on-year basis for quarter three or say, year-on-year quarter two may not be as much as what you will see, because if I recollect right, quarter one of FY ’22 was when the second wave and that overall demand impact happened.
Rishi Vora — Kotak Securities — Analyst
Right. So net-net, still over the last three years, the replacement segment demand would have grown by mid-to-high single digit in PCR and two-wheeler segment, right?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yes, yes.
Sumit — ASK — Analyst
And this year, like on CY basis, what would be kind of a replacement demand, like replacement demand segment growth for the industry…
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
For YTD?
Sumit — ASK — Analyst
Yeah, yeah. CY basis or yeah, YTD nine months.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
It would be positive growth. I can get back to you, but without — let me. Kumar, anything you’d like to share here? But somewhere between 5% and 10% volume growth.
Sumit — ASK — Analyst
Okay, across — blended growth across…
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
I don’t have the data here.
Sumit — ASK — Analyst
Right.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
But I can get back to you on that.
Sumit — ASK — Analyst
Understood.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yeah. Sitting on a rough estimate without the data in front of me, so.
Sumit — ASK — Analyst
Understood.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
I can get back to you.
Sumit — ASK — Analyst
And what would be your — like what would be your estimate for the replacement segment demand growth going into next year? Like, you expect it to be mid-to-high single digit kind of growth or given the price increases taken by all the players, you expect it to be little weaker?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, I think with the price increases happening, so at a value level, you will see some growth, because that impact will come into next year as well to a certain extent. But at a volume level, I mean, I would just take an estimate of a GDP type number, your estimate that how the market grows. If we are able to gain market share, then certainly little bit better than that.
Sumit — ASK — Analyst
Understood. And sir, last question on the quarterly performance. So for standalone, I see other expenses declining by 8%. So it’s just that in this quarter, the expanse towards advertisement is on the lower side and it should come back in the subsequent quarters?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Kumar, would you like you add anything?
Kumar Subbiah — Chief Financial Officer
See, largely, the drop in advertise — marketing expenses, we, in quarter three, we maintain at quarter two levels.
Sumit — ASK — Analyst
Right.
Kumar Subbiah — Chief Financial Officer
There’s no major drop. Normally, our marketing cost goes up during IPL period, goes up a little bit. The larger drop in prices in quarter three, other costs, because of lower level of activities, okay. So we mentioned that we have reduced our inventory, okay, so we brought down our finished goods inventory, which means that our production was less than the sales, okay, and our distribution cost was lower, okay, and our operating expenses in practice was lower because they produce less. It’s largely relating to the level of activities. But marketing expenses at absolute level stayed at the previous quarter level.
Sumit — ASK — Analyst
Understood. Understood. Okay, it was helpful. Thank you so much, sir.
Operator
Thank you. The next question is from the line of Vishal from Swen [Phonetic]. Please go ahead.
Vishal — — Analyst
Hi. Thanks for taking my question, sir. I missed the initial part of the discussion. Just wanted to know what was the capex for the company during the first nine months, and what is the expectation for FY ’23.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So capex for the year, we are looking at about INR750 crore capex, as we had said for the year. We’ve done nearly three-fourth of that, is what we have done. This is largely growth capex.
Vishal — — Analyst
Okay. Growth plus maintenance capex, what is the expectation for FY ’23?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
About INR900 crores. Kumar, right?
Kumar Subbiah — Chief Financial Officer
Yeah, it is INR900 crores. It is INR900 crores. And growth plus maintenance capex in the first three quarter, nine months also approximately about INR680 crores, 75% of the INR900 crores. So we are tracking in line with our full-year projection.
Rishi Vora — Kotak Securities — Analyst
Okay, okay. And what is the expectation for the same growth and maintenance capex for FY ’24.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
So growth capex will be about INR500 crores, INR550 crores next year. Maintenance would be about INR100 crores and INR200 crores kind of change.
Vishal — — Analyst
Okay, okay. And in FY ’24, the growth capex would be mainly towards TBR segment, as you said the TBR debottlenecking scope is already been exhausted by UN, it is approximately around 80%, 85% utilization levels, so are we revisiting that idea of getting into TBR capex?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, the growth capex for next year will be the balance of PCR, as well as the off-highway tire investment that we announced in last quarter, of about INR400 crores is what we announced. So some amount of that will come into next year.
Vishal — — Analyst
Okay, okay. Thank you, sir. That’s all.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
And then there’ll be a few other largely balancing factors in other categories.
Vishal — — Analyst
Thank you, sir. Thank you for taking my question and all the best.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Saket Kapoor — Kapoor & Company — Analyst
Namaskar, sir.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Namaskar.
Saket Kapoor — Kapoor & Company — Analyst
Thank you for this opportunity, sir. Sir, just referring to this…
Operator
Saket, your voice is not audible. Can I request you to speak up a bit?
Saket Kapoor — Kapoor & Company — Analyst
Yeah. Now you can hear me?
Operator
Yes.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yes. Thank you.
Saket Kapoor — Kapoor & Company — Analyst
Yeah, thank you, sir. Sir, this — the environment ministry came with this draft notification for extended producer for waste tires, the regulation. And there was a notification in the month of January. So what is the update on the same, sir? And how are players like CEAT preparing to get this on ground? Any updates, sir, you would like to share?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Right, so there was a notification that was issued in July. But largely, to comply with it, it requires a full ecosystem to be in place, the registered producers, recyclers, tire collection. So I think here, that implementation is not fully complete. So here, we are working with the ATMA body is working with the Central Pollution Control Board, MoES, et cetera, to figure out the whole execution plan. But we will of course fully comply with the requirements we want to be leading in terms of total sustainability. But I’d say that there are certain practical elements that are still to be ironed out, after which we will get some more clarity. We’re already using recycled materials in part of our product recipe and all of that. So we still need to understand the net impact. And we — once we get some more clarity, we can share the same with you.
Saket Kapoor — Kapoor & Company — Analyst
Okay. Sir, as you just mentioned that the ecosystem is not prepared for the same — how to locate where the tire and how is — the way the notification was, as if the entire responsibility was put on the producers, means the company whose — for who’s tire it is, that — the been borne by the company to get it recycled. So as of now, sir, the nitty-gritties are — is still to be worked out. That is what the latest on it or are we are continuing the process as per the notification?
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, no. Like, say, for example, there has to be a portal in place, whether there will be certain registered recyclers. Now, all of that is still work in progress, because even if you are recycling, are you doing it from the right person? Are they registered? Do they have the various licenses that are there? So that clarity, and that is still work in progress.
Saket Kapoor — Kapoor & Company — Analyst
Right. Right, sir. But it is a — it is going to be the order of the day going ahead, that is what…
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Yes, we feel so, yes.
Saket Kapoor — Kapoor & Company — Analyst
And, now coming to…
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
There can be a delay in terms of timeline, there can be changes in rules in terms of the percentages that the responsibility will be for each tire — for the industry every year, I believe goes up every year on a certain basis. So those changes may happen based on the implementation speed and execution capability.
Saket Kapoor — Kapoor & Company — Analyst
Correct, sir. And on this demand side, as you mentioned in the opening remarks, sir, as we have seen other plays, the cord players also in the tire segment, they are also — they are also guiding for languishing of demand going ahead. So could you throw us some more understanding that are you witnessing tapering of demand, especially from the — in the replacement market and the factors that are leading to the same, sir.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
No, I have already given a fair amount of insight into replacement demand. I think you could just have a look at the transcript later on.
Saket Kapoor — Kapoor & Company — Analyst
Okay. Okay, sir. Thank you. Thank you for the same. And all the best.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you. Thank you.
Operator
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing remarks. Thank you and over to you.
Anant Vardhan Goenka — Managing Director & Chief Executive Officer
Thank you everyone for your continued interest in CEAT, and coming in a little late in the evening for the call. Look forward to catching up next quarter once again. All the best to you and thank you very much for your time.
Operator
[Operator Closing Remarks]