Apollo Tyres: Raw material prices drags profit down 72%

High raw material prices strongly influenced the bottom line at Apollo Tyres Ltd in the three months to 30 June 2017. Although net sales, at Rs 32.58 billion (£391.0 million), were in line with those achieved in the corresponding quarter a year earlier, operating profit declined 50.3 per cent to Rs 2.82 billion (£33.8 million) and net profit was down 72.0 per cent to Rs 880.3 million (£10.6 million).

Commenting on the quarter, company chairman Onkar S Kanwar said: “The results reflect the impact of the rising raw material prices on our operations. Raw material prices as a basket has jumped more than 30 per cent in the first quarter, as compared to the same period last year, and has negatively impacted our margins. While, rubber prices have softened to some extent, other raw materials are still on a higher side, which is likely to put our margins under pressure going forward as well. Considering this, we may need to take price corrections.”

While Indian Operations’ grew marginally to close at Rs 22.8 billion (£274.1 million) and was subdued because of destocking prior to the introduction of VAT in India as well as due to issues related to the switchover from BS III to BS IV in the commercial vehicle segment, European Operations revenues decreased 3.6 per cent to Rs 10.2 billion (£121.9 million). The result for Europe was down 74.0 per cent to Rs 242.6 million (£2.9 million).

“The silver lining for us, is the robust demand from the OEMs and the growing vehicle sales in India, both passenger and commercial, post GST (VAT) implementation,” added Kanwar. “The recommendation by the Directorate General of Anti Dumping (DGAD) in India to impose anti-dumping duty on truck-bus radials from China, has vindicated our stand on the same, and which, once implemented, would be a boost for us in India. In Europe, the increased sales reported by most of the vehicle manufacturers in the first half of the calendar year, would also prove to be a positive for us going forward.”

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