Costs of tyre sector

Major Costs
• Raw material consumed is the biggest contributor in the
manufacturing costs of tyre manufacturing companies.
Item Servis industries General tyre
Raw material consumed 13466.222 5,948,543
Total manufacturing costs 19083.516 9,914,142
Percentage contribution 71% 60%

• Salaries and wages in the second biggest component (Servis:14%,

General:18%) in the manufacturing costs as tyre sector requires
skilled labor.
Major components of tyre
Major Costs (Natural Rubber)
• Natural Rubber is obtained from the latex of the rubber tree.
• It is mainly imported from Malaysia, Indonesia and Thailand.
• Natural rubber RSS 3 Singapore price index has been taken to analyze
the trends of historical natural rubber prices.
• RSS3 rubber sheets are used in the production of Tyres (tires) &
Tubes, Tread Carcass, Off road tyres & ADV tyres, Extruded hoses,
Footwear etc. Tyre industry is the biggest consumer of RSS3 rubber
sheets.
Major Costs (Synthetic Rubber)
• Synthetic rubber is another major cost in the tyre sector.
• Styrene-Butadiene Rubber (SBR) and Polybutadiene Rubber (BR) are
the most widely used synthetic rubbers.
• Synthetic rubbers are produced by combining monomers originating
from refined sources of hydrocarbons such as coal, crude petroleum,
and natural gas.
• Servis industries limited majorly imports Iso Butyl rubber (synthetic
rubber) from Sibur which is a company of Russia.
• US SBR synthetic rubber spot price index has been taken to analyze
the historical trend of Synthetic rubber historical prices.
Major Costs (Carbon Black)
• Tyre sector mainly uses carbon Black N330, N550, N660.
• They are used in the surface material of tyres, the rubber for cord layer, rubber
for inner tubes.
• Pakistan tyre sector mostly import carbon black from China.
• US CARBON BLACK AND ALLIED PRODUCTS OUTPUT PRICES INDEX has been
taken to analyze the historical price trends of carbon black.
Comparison between Servis and General tyre
• Servis tyre operating profit margin and General tyre gross profit margin had
almost similar trend.
Profit margins of tyre sector
30%

25%

20%

15%

10%

5%

0%
Oct-11

Oct-12

Oct-13

Oct-14

Oct-15

Oct-16

Oct-17

Oct-18

Oct-19
Jun-13

Jun-17
Jun-11

Feb-12
Jun-12

Feb-13

Feb-14
Jun-14

Feb-15
Jun-15

Feb-16
Jun-16

Feb-17

Feb-18
Jun-18

Feb-19
Jun-19

Feb-20
Servis operating profit margin General gross profit margin
Servis tyre margin and costs
• Synthetic rubber and carbon black indexes almost coincide with each other.
• Russian synthetic rubber price index did not explain the change in margin so it was not
included in the graph.
Servis Tyres operating profit margin vs costs
400 20%
18%
350
16%
300 14%

250 12%
10%
200 8%
150 6%
4%
100
2%
50 0%
Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19
Sep-11

Mar-12

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Mar-17

Sep-17

Sep-18

Sep-19
Dec-11

Dec-12
Mar-13

Dec-13
Mar-14

Dec-14
Mar-15

Dec-15
Mar-16

Dec-16

Dec-17
Mar-18

Dec-18
Mar-19

Dec-19
Mar-20
Natural rubber Synthetic rubber (US) Carbon black US Servis operating profit margin
 50
100
150
200
250
300
350
400
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13

Natural rubber
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15

Synthetic rubber (US)

Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
General gross margin vs costs

Dec-16
Carbon black US

Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
General tyre gross margin and costs

Jun-18
Sep-18
Dec-18
Mar-19
General gross profit margin

Jun-19
Sep-19
Dec-19
Mar-20
0%
5%
10%
15%
20%
25%
30%