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Moneycontrol » News Center » Business » Earnings
Will maintain margins at 6%: Apollo Tyres
Published on Tue, Jan 15, 2008 at 14:19   |  Updated at Thu, Jan 17, 2008 at 12:46  |  Source : CNBC-TV18
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Apollo Tyres has announced its third quarter numbers. It has posted standalone net profit of Rs 62 crore for the quarter ended December 2007 as against Rs 35.07 crore in same quarter of last year on net sales of Rs 974 crore versus Rs 857 crore.

 


Onkar S Kanwar, CMD at Apollo Tyres told CNBC-TV18 that margins will be maintained at 6% and the price hike will be passed on to consumers. He added that the company is not impacted by China threat, due to better quality and service.

 

Q: Could you walk us through the numbers in this particular quarter in terms of volume growth and how the radial tyres business has done? Comment on the margins, which have increased YoY substantially from 10.7% to about 13.4%. On the raw material cost front with rubber prices moving up, what is the sense that you are getting there?

 

A: We have had a double-digit growth in terms of our volume that is 13% in the quarter, and on a 9-month basis, our growth has also been over 13%. Overall, our net profit has jumped from over 4-6% and this is the standalone on India basis.

 

As far as the Dunlop South Africa is concerned, we have had a growth of almost 29%. There also we had a double-digit growth and as far as the overall profit is concerned, we have had a growth much higher at almost 8%. Overall growth has been about 6% in net profit. Primarily, it is due to 100% utilisation of our production facilities, better efficiencies and a better product mix.

 

Q: If you can give us an idea of the kind of capex that you have planned because you are intending about Rs 220 crore investment in your radial facility in Tamil Nadu? You have about Rs 10 crore slated for the off road tyre business, so what is the total capex going into '08-'09 or the next 18-months?

 

A: We have just been able to get the approval of almost about Rs 550 crore for the various projects. Out of that Rs 220 crore will be in Tamil Nadu, then we have some capex for going into project at Cochin and Baroda and the total capex and sanctions have been almost Rs 550 crore whereas for our South African project, we have got another approval for Rs 130 crore.

 

Q: How are you looking at raising this money, or are your internal accruals going to suffice?

 

A: Basically all this money will be from the internal accruals.

 

Q: Also, can you give us an idea on the margins?

 

A: On the margins, already with the kind of 100% efficiencies in the previous factories, we are running our factories at 100% and so our efficiencies and the product mix has been getting better. So, that is the reason you will see a profit margin of 6%.

 

  

Q: The next question is about the sustainability of these margins, because on a YoY basis, natural rubber prices have moved up about 10.5% as we are given to understand. You are looking at hiking prices in the near-term. What would be the quantum of hike that you would take and where do you target margins to be over the next few quarters?

 

A: I think you will see us continue to maintain the same margins of at least 6%. Our idea would be to see how we could further bring in more efficiency and at the same time prices may go up marginally and passed on to the consumers.

 

Q: What is the kind of challenge that the Chinese radial market is imposing currently on your market?

 

A: I think that is a very big fact and we have taken up this matter with the government because there is no market economy, there are no cost comparisons. And they are just able to dump their tyres into our markets.

 

 

Q: In terms of market share, how much of a trim has it resulted in for Apollo Tyres?

 

A: I would say that right now, we have not been impacted very badly. YoY we have grown by 13%. We have not been impacted because we are backed by good quality and good service. So, the customer is very keen to see the service backup, whereas the Chinese are not able to provide the right kind of quality and at the same time the service backup.

 

 

Q: Could you highlight for us the cost differential between the Chinese products and the domestic products at this point in time and how things may pan out over the next three months?

 

A: I wouldn’t be able to tell you because basically they don’t have any pricing concept. So, they bring in products and they decide what the local price is and then they perhaps reduce prices. It is very difficult to determine what is the price comparison between the two countries.

 

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Tags: Apollo Tyres, Onkar S Kanwar
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