Apollo Tyres’ Q1 profit increase falls short of expectations

On 6 August the Board of Directors at Apollo Tyres Ltd approved the company’s unaudited results for the first quarter of its 2014-15 financial year. For the three-month period ending 30 June 2014, Apollo Tyres Ltd, on a consolidated level, reported net sales of Rs 32.35 billion (£314.29 million), 1.4 per cent higher than a year earlier. Operating profit rose 13.4 per cent to Rs 4.58 billion (£44.50 million) and net profit was up 37.3 per cent to Rs 2.28 billion (£22.15 million).

Despite this strong rise in net profit, shares in Apollo Tyres dipped six per cent from their intra-day high to Rs 177 following the announcement; as Livemint.com noted, Apollo’s consolidated operating profit was approximately ten per cent lower than Bloomberg’s consensus of 17 analysts, and the 13.2 per cent operating margin was thus lower by nearly 80 basis points. This result was hard to comprehend, given the lowering of rubber prices over the past year.

Net profit was also lower than expected due to the company’s South African business, which experienced a 59 per cent year-on-year drop in revenue to Rs 1,598 million (£15.53 million) and a 90.5 per cent decrease in profit before exceptional items and tax to Rs 17.58 million (£170,800) in the three months to 30 June 2014. The operation’s results for the quarter were affected by the sale of part of the South African business in the prior fiscal year. Apollo Tyres’ Indian operations registered 7.2 per cent increase in revenue to Rs 23,282 million (£226.19 million) in the first quarter, while the company’s European operations enjoyed growth of 29.1 per cent to Rs 9,503 million (£92.32 million).

At the company’s Annual General Meeting earlier in the day, shareholders approved the annual dividend payout of 75 per cent per share (0.75 per equity share), for the year ended 31 March 2014.

Further information about Apollo Tyres can be found here.