Apollo Tyres’ Q3FY13 Profits Up By 83%

Apollo Tyres announced its Q3FY13 results on February 6. Overall, the results have been robust due to several factors that include a turnaround in its international operations and the easing of rubber prices.

In Q3FY13, the company saw a marginal decline of 0.34% to Rs 3217.35 crore in revenues as compared to that in Q3FY12. This was because the revenues from India dropped by 2.73% YoY to Rs 2036.09 crore. Since India contributes over 60% of the total revenues of Apollo Tyres, the decline offset the strength seen in South Africa and Other markets.

This slowdown in domestic operations can be attributed to the overall slowdown seen in the Indian automobile industry as well as to the production lockdown by workers at its facility at Limda, Vadodara, which lasted for 19 days (from October 22, 2012 to November 9, 2012).

While revenues declined marginally, the operational efficiency improved by leaps and bounds. Its EBITDA margins increased by 158 basis points to 11.88% and the net profit margins by 256 basis points to 5.61%. The key reason for this jump was that the EBIT for Apollo Tyres’ South African operations came in at Rs 4.79 crore in Q3FY13 as compared to a loss of Rs 29.77 crore in Q3FY12. The EBIT from operations in ‘Other’ countries was also reported at Rs 3.82 crore in Q3FY13 as compared to a loss of Rs 2.13 crore in Q3FY12.

What also aided the margins improvement massively was the fact that rubber prices have eased by almost 15% as compared to the previous year. The average price of domestic (Kottayam) rubber in Q3FY13 of grades RSS – 3, 4 and 5 has been Rs 17233.67 per 100 kg, lower by 14.85% than the average of Rs 20238.33 per 100 kg in Q3FY12.

Going ahead, Apollo Tyres plans to set up a new marketing office in London to co-ordinate its international business that spans across 50 countries and contributes to about 27% of the total business.

In view of the strong results and stabilisation of rubber prices at the current levels, we think that the margins will remain stable in the coming quarters. Moreover, revenue growth would be supported by sales to the replacement market, since sales were robust in FY09. We thus maintain our positive outlook on the tyre industry and on Apollo Tyres.