The company witnessed big drop in margins. Big surge in other income contributed to the total growth in net profit. Lower tax provision further boosted bottomline growth.

"We have been able to deliver positive numbers in spite of various external factors in the last few months. While, uncertainty around GST in India, adversely impacted the commercial vehicle segment, the passenger vehicle segment witnessed a good growth," Apollo Tyres Ltd Chairman Onkar S Kanwar said. ‘'European operations grew both in revenue and volume terms, and that too, faster than the industry'', he added. "Having said that, the increasing rubber and other raw material prices in the last few months would be a challenge for us, and the industry, going forward," Kanwar said.

Quarterly Performance

The company witnessed increase in the raw material cost (inclusive of purchase of stock in trade) during third quarter ended September 2016 with increase in rubber price on yoy basis. The raw material cost as % of sales net of stock adjustments rose 380 bps to 52.7%. The employee cost fell 50 bps to 12.9% in Q3 FY 16-17. Other expenses fell 30 bps to 20%. Resultantly, operating margins slipped 280 bps 14.4%. Operating profit fell 2% to Rs 499.33 crore on a y-o-y basis.

Domestic prices of natural rubber, which makes up more than 50% of the cost of a tyre, increased to around Rs 133 per kg in December 2016. Prices ranged between Rs 117-133 per Kg during Q3 FY 17. Prices were around Rs 103-114/ Kg in the same quarter a year ago. A year back, rubber prices had been trading lower on persistent worries about slower economic growth in the main consumer, China, and oversupply.

With 257% rise in other income to Rs 37.34 crore, PBIDT rose 3% to Rs 536.7 crore. Interest cost rose 35% to Rs 28.32 crore. Depreciation cost increased 7% at Rs 113.47 crore. Thus, PBT before EO registered 1% rise to Rs 394.88 crore. After considering 340 bps decrease in the effective tax rate at around 25% and 11% drop in tax provision, PAT rose 6% at Rs 295.83 crore.

During the quarter, the company earned 61% and 31% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas) respectively. Revenues from APMEA rose 2%. EA registered 54% rise in revenues. The other segment comprising of other business entities which constitutes 8% of overall revenues, registered 48% rise in income.

At the segment front, APEMA business witnessed 9% drop in PBIT at Rs 279.32 crore and constituted 66% of the total segment profit. Segment profit of EA operations rose 39% to Rs 129.92 crore and constituted 31% of segment profit. Profit from other segment stood at Rs 11.26 crore, rise of 91%.

Nine Month Performance:

For the first nine months ended December 2016, the company posted 12% rise in net income to Rs 9854 crore and 2% rise in net profit to Rs 871 crore.

The raw material cost together with purchase of stock as % of sales net of stock adjustments rose 180 bps to 451.7%. The employee cost was steady at 13.3% in 9M FY 16-17. Other expenses rose 70 bps to 20.2%. Resultantly, operating margins slipped 200 bps 15%. Operating profit fell 2% to Rs 1476.5 crore on a y-o-y basis.

With 102% rise in other income to Rs 104.14 crore, PBIDT rose 2% to Rs 1580.7 crore. Interest cost rose 7% to Rs 78.08 crore. Depreciation cost increased 6% at Rs 325.24 crore. Thus, PBT before EO registered marginal rise to Rs 1177 crore. Last year the company incurred an EO income of Rs 47.7 crore. Hence PBT after EO fell 4% at 1177 crore. After considering 420 bps decrease in the effective tax rate at around 26.01% and 17% drop in tax provision, PAT rose 2% at Rs 871.06 crore.

During the period, the company earned 63% and 28% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas) respectively. Revenues from APMEA fell marginally. EA registered 43% rise in revenues. The other segment comprising of other business entities which constitutes 8% of overall revenues, registered 106% rise in income.

At the segment front, APEMA business witnessed 6% drop in PBIT at Rs 948 crore and constituted 76% of the total segment profit. Segment profit of EA operations rose 23% to Rs 266.56 crore and constituted 21% of segment profit. Profit from other segment stood at Rs 29.66 crore, rise of 264%.

The stocks closed 1.4% lower around Rs 184.35 at BSE on 02 Feb, 2017, a day after earnings were announced.