Apollo Quarter Results Reflect Tough Times for Industry

Upon reporting Apollo Tyres’ second quarter 2008 results, a quarter in which consolidated net profit dropped 74 per cent on the previous year, company chairman Onkar S Kanwar stated that, despite difficult times, Apollo retains a positive outlook for the future. “It has been a testing quarter for the company and us as an industry, but I do believe that the worst might be behind us and it’s time to plan for the future,” he said. “The positive that I take from here is a consistent growth in sales, especially in South Africa, where we are able to now reap the benefits of our manufacturing and marketing excellence with a near 30 per cent sales growth this quarter.”

Consolidated revenue for the July to September 2008 period came to Rs 12.6 billion (£151.20 million), an increase of 16.3 per cent from the Rs 10.8 billion earned in the corresponding 2007 quarter. Apollo states, however, that the gains made from higher sales were ‘completely negated’ by a 40 per cent rise in the cost of raw materials. For this reason, consolidated net profit after tax stood at a mere Rs 151 million (£1.81 million), down 74 per cent from the Rs 576 million (£6.91 million) net profit last year. The company’s standalone India Operations increased revenue by 16.1 per cent to Rs 9.8 billion (£117.60 million) in the quarter, however net profit after tax declined a massive 85 per cent, from Rs 511 million (£6.13 million) to Rs 78 million (£936,000).

The poor quarter performance dragged down the company’s overall results for the first half of the financial year. While consolidated revenues were up 16 per cent in the half year to Rs 25.8 billion (£309.59 million), consolidated net profit after tax, which in the first quarter showed a 7.3 per cent gain, over the half year period decreased 34 per cent from Rs 1.1 billion (£13.20 million) to Rs 737.6 million (£8.85 million).

“The clear learning from H1 has been that we can protect customers and absorb dramatically higher raw material costs, by enhancing internal efficiencies, only to a limited extent,” Mr. Kanwar continued. “The sharp fall in profits, despite higher sales, makes a strong and rational case for price hikes this quarter. It is not an option, but a requirement to ensure that fresh investments being made, for products required by the Indian customer, continue to remain on course.”