Arvind Poddar, BKT chairman and managing director, discusses how his company is positioned for continued success in the United States.
MTD: Can you bring us up to speed on BKT USA's performance during the first half of the year? What were some of BKT's accomplishments and highlights in the U.S.?
Poddar: During the first half of 2024, BKT USA demonstrated strong performance, reflecting our ongoing commitment to innovation, quality and customer satisfaction. We have achieved an impressive overall growth of 16% compared to the previous year. This growth is a testament to our strategic investments and our focus on meeting the evolving needs of our customers.
In the wholesale distribution channel, we have experienced a 20% increase over 2023.
Specifically, the agricultural segment grew by 20% year-over-year, industrial/construction/port by 4%, OTR by 14% and ATV/go-kart/turf by 32%.
One of the key highlights has been the rising demand for our advanced agricultural products, particularly those featuring very-high flexion (VF) and increased flexion (IF) technologies. These products offer significant benefits such as lower soil compaction, higher load capacity and fuel savings. Farmers have increasingly appreciated these advantages, driving substantial growth in our agricultural segment.
We have also expanded our range of giant OTR tires to include sizes up to 57 inches, with 63-inch tires currently under development. This expansion supports the mining and construction industries, which require durable and high-performing tires for their demanding applications.
Another significant accomplishment has been our venture into manufacturing agricultural and compact track loader tracks. This diversification allows us to offer more comprehensive solutions to our customers and meet a wider range of needs in the agricultural sector.
Furthermore, we have made substantial investments in increasing the production capacity of our mold plant. This expansion enables us to introduce new tire sizes and designs more rapidly, providing greater flexibility and options for our customers.
In addition to our product innovations, BKT has taken major steps forward in sustainability. We have established a carbon black plant at our flagship facility in Bhuj, India, which uses flue gas produced as a by-product of carbon black production for power generation, replacing coal and lowering our carbon footprint. We have also invested in solar and wind power generation.
Overall, the first half of the year has been marked by significant achievements and areas of growth, particularly in the agricultural and OTR sectors. Our strategic investments and focus on customer needs have positioned BKT USA for continued success and expansion in the market. Furthermore, our dedication to innovation, sustainability and high-quality products ensures that we remain a trusted partner for our customers, helping them achieve their goals efficiently and effectively.
MTD: What was demand for OTR and ag tires like in the U.S. during the first six months of 2024? What do you expect to see during the second half of the year?
Poddar: We have seen a mixed demand landscape for OTR and agricultural tires in the U.S. market. On the agricultural side, demand has been robust. As said earlier, we've experienced an increase in demand for our advanced agricultural products, particularly those featuring VF and IF technologies. These technologies provide significant benefits, such as lower soil compaction, higher load capacity and fuel savings, which have been increasingly appreciated by farmers.
However, the market has faced several challenges, including adverse weather conditions, high interest rates, high inflation, labor shortages and uncertainties related to policies, both domestic and export. Additionally, the excess supply of major agricultural commodities has posed some difficulties. Despite these challenges, BKT has managed to maintain strong performance by continuously innovating and providing high-quality, reliable products that meet the evolving needs of our customers. Our commitment to sustainability and advanced technology has helped us stand out in a competitive market.
In the OTR segment, demand has been more subdued, primarily due to price pressures and an oversupply of OTR tires, which has increased competition. Nevertheless, the construction segment has remained stable, driven by ongoing projects in residential housing, roads and bridges during the first part of 2024. Demand for large mining tires has largely been met through national account programs of tire companies, with major mining firms preferring global annual contracts with tire manufacturers, which shapes our sales strategy in this sector.
Looking forward to the second half of the year, we are optimistic about positive developments in the agricultural tire market. Net farm income, a crucial driver for agricultural tire demand, is expected to improve significantly with upcoming legislative support. Traditionally, the planting and harvest seasons increase the need for equipment replacement or maintenance to ensure operational efficiency, thereby boosting tire demand. Additionally, in the last quarter of 2024, distributors typically plan their tire purchases and place orders to meet the demand created during the early spring seeding process in the first quarter of 2025.
We anticipate continued growth in the agricultural sector, driven by these seasonal demands and the expected positive impact of legislative support. In the OTR sector, while competition is likely to remain intense, we are confident in our ability to leverage our strengths and strategic investments to navigate these challenges and support our customers effectively.
MTD: In 2023, BKT announced that enhancements at its Bhuj plant will enable the company to achieve annual production of 600,000 metric tons and annual global turnover of $2 billion - all within the next three years. Is BKT on track to reach those objectives and is the company making investments at its other plants? If so, can you elaborate?
Poddar: When we announced our ambitious target in early 2023, we were confident in our ability to achieve annual production of 600,000 metric tons and a global turnover of $2 billion by 2026. However, given the evolving global landscape and the uncertainties affecting various markets, we have undertaken a realistic reassessment of our timelines. We now project reaching these objectives by 2029.
This revision is not a setback but a strategic adjustment to align with the current and anticipated global economic conditions. By extending our timeline, we ensure that we can navigate the complexities of the market effectively and sustainably. Our commitment to these goals remains unwavering and this adjustment allows us to continue delivering high-quality products and services without compromising our standards or overstretching our resources.
In addition to the enhancements at our Bhuj plant, we are also making significant investments in our other facilities to support this growth trajectory. These investments include the expansion of our product range, including advanced agricultural tires and large OTR tires. We are also focusing on sustainability initiatives, such as investing in renewable energy sources like solar and wind power.
These strategic investments are designed to bolster our production capabilities and ensure we are well-prepared to meet the future demands of our customers. By taking a measured and realistic approach, we are positioning BKT to achieve long-term success and resilience in a dynamic global market.
MTD: How would you describe the state of BKT's supply to its U.S. customers? Have the shipping challenges experienced earlier this year abated?
Poddar: The state of BKT's supply to our U.S. customers has remained satisfactory despite ongoing logistics challenges. Earlier this year, geopolitical issues resulted in longer transit times to U.S. ports, as ships had to travel an additional 3,500 miles around the Cape of Good Hope. This extended transit time by two to three weeks and led to fluctuating freight costs, creating an additional challenge in managing and recovering these costs.
While we have made considerable efforts to mitigate these issues, logistics challenges persist. Shipping companies have been difficult to negotiate with due to unforeseen circumstances, and their conditions have been challenging to address satisfactorily.
Unfortunately, this has sometimes resulted in either us or our customers bearing these additional costs.
Despite these hurdles, we have worked diligently to ensure a steady and reliable supply chain for our U.S. customers. We continue to adapt and find solutions to navigate these logistical challenges, ensuring that our customers receive their products in a timely manner. Our commitment to maintaining high standards of service and supply remains strong and we are constantly looking for ways to improve our logistics and mitigate any disruptions.
MTD: BKT has maintained a steady cadence of new tire launches for many years. Why is it important to add new products - and improve upon existing products - on a regular basis? How does this benefit BKT's dealers and distributors?
Poddar: At BKT, introducing new products and continually improving existing ones is fundamental to our strategy for several reasons. Firstly, the tire industry is dynamic and constantly evolving. By regularly launching new products and enhancing current ones, we ensure that we are meeting the latest demands of the market and addressing the changing needs of our customers.
For our dealers and distributors, these continuous improvements and new product introductions provide several benefits. Firstly, they enable our partners to offer the most advanced and competitive products to their customers, which helps them to differentiate themselves in the market. By having access to a broad and innovative product range, dealers can better meet the specific needs of their customers, whether in agriculture, construction or other sectors.
Furthermore, new product launches create excitement and engagement within the market. They provide opportunities for marketing and promotional activities that can drive sales and enhance brand loyalty. For our distributors, this means increased business opportunities and the ability to expand their market reach with products that are in high demand.
In addition, regularly updating our product line helps in building long-term relationships with our partners. It demonstrates our commitment to supporting their growth and success by providing them with high-quality, reliable, and innovative products. This ongoing collaboration ensures that we are aligned with the needs of the market and can respond swiftly to new challenges and opportunities.
Overall, our steady cadence of new tire launches, and product improvements is crucial for maintaining our competitive edge, supporting our dealers and distributors, and ultimately delivering the best possible solutions to our end customers.
MTD: What can BKT's U.S.-based distributors and dealers expect to see from the company during the second half of 2024?
Poddar: During the second half of 2024, our U.S.-based distributors and dealers can expect several key initiatives and support measures from BKT.
Firstly, we are committed to providing high-quality, consistent products delivered on time to meet their needs. Our focus on maintaining rigorous quality standards ensures that our partners can rely on the performance and durability of BKT tires.
Training is another critical area where we invest heavily. We offer extensive training programs for sales and service personnel to ensure they are well-equipped to support our customers and promote our products effectively.
Fast after-sales service is a priority for us. We are dedicated to resolving any issues promptly to maintain customer satisfaction and support our partners' reputations.
Additionally, we provide robust advertising and marketing support to promote the BKT brand. This includes co-branding opportunities and point-of-purchase materials to help our dealers effectively market our products.
We continuously expand our tire range based on customer needs, ensuring that our product lineup remains relevant and comprehensive. This expansion allows our partners to cater to a broader customer base and meet diverse market demands.
Our associated dealer program continues to grow, enhancing our reach and supporting our distributors. We have seen a 10% increase in the number of associated dealers year-to-date. This program has proven highly successful, providing positive feedback and helping in the sell-out process for our distributors.
In summary, BKT is committed to supporting our U.S.-based distributors and dealers with high-quality products, fair pricing, excellent margins, comprehensive training, fast after-sales service, strong marketing support and an ever-expanding product range. These efforts are designed to ensure their success and strengthen our partnership in the market.
