Apollo Tyres Q3 net up 85% on better product mix

Growth in profit despite marginal fall in net income

Apollo Tyres posted 84.21% increase in net profit at Rs 180.60 crore for the quarter ended December 31, 2012 on back of a better product mix and strong sales in after-markets.

The company had recorded net profit of Rs 98.04 crore in the corresponding period in the last financial year.

Interestingly, the growth in net profit has come despite net income during the quarter declining marginally to Rs 3,217.35 crore from Rs 3,228.24 crore registered in the year-ago period.

Suman, Sarkar, chief financial officer, Apollo Tyres, said, "Our original equipmemt manufacturers (OEM) business was poor during the quarter which affected our topline growth. But profit went up as after-market demand is still strong and it is more profitable than the OEM segment.”

Besides, the company recently commissioned its facility in Chennai where it produces radials which offer better margins on sales. The Chennai plant currently produces 12,000 car and 4,000 truck radial tyres everyday.

"However, as vehicle sales are down, we have witnessed negative growth in our topline. Our biggest contributor Tata Motors, which purchases both truck and car tyres, are seeing their sales going down. It has impacted us," Sarkar added. Out of the consolidated net income, the company's European subsidiary Apollo Vredestein BV contributed with Rs 816 crore.

He, however, said the vehicle makers are positive for a turnaround in sales after the recent cut in interest rates and is expecting an industry-friendly Budget.

Onkar S Kanwar, chairman, Apollo Tyres said: "The dynamics in our largest market -– India, have not been easy. Europe and South Africa too are facing their own economic issues. In India, the commercial vehicle segment has been affected the most, while the other sectors have not remained unscathed. The company expects the passenger vehicle segment to recover in the next two quarters, while commercial vehicle sales will take more time to normalize.”

"Having said that, our continued focus on improving the product and customer mix across geographies has helped us better our profitability. I believe that the worst is behind us and we should see improvement in both automotive and tyre sales from the beginning of the new fiscal”, Kanwar added.

Shares of Apollo Tyres were trading 0.35% down at Rs 84.85 apiece on close on the Bombay Stock Exchange (BSE).