Apollo Tyres lifts profit margin to 18.7% in April-June quarter

Unaudited financial results for the first quarter of Apollo Tyre Ltd’s 2015-16 financial year were released yesterday, and these show a year-on-year rise in the company’s operating and net profits despite lower net sales.

Sales in the three months to 30 June were, at Rs 28.32 billion (£282.9 million), 12.1 per cent lower than in the first quarter of 2014-15. Revenue for the tyre maker’s European operation was down 12.0 per cent to Rs 7.71 billion, while Indian operation revenue was adversely impacted by rising imports of commercial vehicle tyres into the country and declined 7.43 per cent to Rs 21.55 billion. “More than 30 per cent of the demand for truck-bus radials from the replacement market in India is being met by these imported tyres, which are mostly from China,” Apollo reports. Other revenue sank 33.1 per cent to Rs 1.76 billion

Operating profit rose 15.5 per cent year-on-year to Rs 5.29 billion (£52.8 million) in the three months to 30 June 2015, with a margin of 18.7 per cent. Net profit increased 27.6 per cent to Rs 2.91 billion (£29.1 million).

Commenting on the results, company chairman Onkar S Kanwar said: “In a slow-growth market across geographies, further marred by unregulated imports of tyres in India, we have planned and invested to capitalise on the future opportunities. This strategic planning will reduce our dependence on a particular market for growth and help us expand our global footprint.”

The investments Kanwar referred to include an increase in truck and bus radial production capacity at Apollo Tyres’ Chennai plant; the company will invest Rs 15 billion (£149.8 million) to lift daily capacity from 6,000 to 9,000 tyres. The chairman considers Apollo’s decision to invest in a truck and bus radial facility in Chennai “a wise one” as it has handed the company “clear” leadership in the high growth TBR segment. “To maintain this we are going ahead with further expansion in the capacity there, which will help us maintain our leadership position while further improving the economies of scale that we enjoy at this plant.”

Other planned investments will see “expansions and de-bottlenecking projects” undertaken at Apollo’s factories in Kerala and Baroda; according to Kanwar, this work is being undertaken as part of Apollo’s “push for profitable growth opportunities in a slow growth market.”

Further information about Apollo Tyres’ Q1 2015-16 results can be found in our company profiles and reports section.