Hit by high raw material prices, Apollo Tyres today posted a low 4% growth in consolidated net profit to Rs 77 crore for the quarter ended June 30, 2011, vis-a-vis the same period last fiscal.
The company, which had reported a net profit of Rs 74 crore for the corresponding quarter last fiscal, said high raw material prices and slow demand during the quarter have impacted its profitability.
During the reporting quarter, the firm achieved consolidated net sales of Rs 2,822 crore, a 55% jump from Rs 1,820 crore in the corresponding period last fiscal.
"The quarter has been a tough one. Raw material is a big challenge for us. Natural rubber prices have seen an all-time high. We have also increased the prices by 14%. There has also been impact on the demand," Apollo Tyres Chief Financial Officer Sunam Sarkar told PTI.
However, the company said it is not looking at effecting any price hikes in the immediate future. He said raw material prices have come down slightly and global crude prices have also softened.
"The past year has been ruled by rising prices and a shortage in supply. (Natural rubber) prices hit as high as $6,768 a tonne in February this year. Experts predict that this tightness is likely to last till the year 2018," Apollo Tyres chairman Onkar Kanwar said at the company's annual general meeting.
"Experts believe that the gap between the growing demand for natural rubber and dwindling supplies is going to increase to alarming proportions of 1 million tonne by the year 2020," he said.
However, Sarkar said the impact of the rising input cost has not been manifested itself in overseas markets, particularly European countries, unlike India, because of the use of synthetic rubber.
The firm is also expanding its presence in Australia, Dubai and Indonesia, among other countries. The full capacity of its new Chennai plant is expected to be commissioned toward the end of this year.
"Protecting margins and retaining topline growth will be our priority for the fiscal," Sarkar said.
Shares of Apollo Tyres were trading at Rs 67.75 on the BSE, down 4.4% from the previous close.