Apollo Tyre's first quarter profit beat expectations, rising 28% year-on-year to Rs 290.6 crore led by strong operational performance and lower finance cost. However, revenue missed forecast, down 12% to Rs 2,845.3 crore in June 2015 quarter compared to Rs 3,235.5 crore in the year-ago period due to lower demand in domestic and export markets. Sales were also impacted by heavy dumping of Chinese tyres into India.
Profit was estimated at Rs 281 crore on revenue of Rs 3,112 crore for the quarter.
Low raw material costs combined with some rise in original equipment manufacturer (OEM) and replacement demand bode well for the company. Other than natural rubber, the steep fall in crude oil prices has resulted in an equally sharp decline in prices of synthetic rubber and other rubber chemicals. Rubber constitutes 70% of raw-material costs of a typical tyre company.
Quarterly Performance
With decline in the rubber prices, the company has witnessed substantial decline in the raw material cost. The raw material cost as % of sales net of stock adjustments has declined 860 bps to 44.17%. The employee cost fell 23 bps to 12.45% in Q1 FY 15-16. Other expenses rose by 230 bps to 18.9%. Resultantly, Operating margins improved 460 bps 17.7%. Operating profit rose by 18% to Rs 502.6 crore on a y-o-y basis.
For Natural rubber which makes up more than 50% of the cost of a tyre, the local rubber price has fallen to Rs 120 per kg, the lowest level in eight months. A year back it was around Rs 145.
With 23% drop in other income to Rs 25.43 crore, PBIDT increased by 15% to Rs 528 crore. Interest cost fell by 54% to Rs 24.32 crore. Depreciation cost decreased by 12% at Rs 88.6 crore. Thus, PBT increased by 36% to Rs 415 crore. After considering 488 bps increase in the effective tax rate at around 30% and 63% rise in tax provision, Net Profit rose 28% at Rs 290.6 crore.
During the quarter, the company earned 69% and 25% of its revenues from India and Europe respectively. Revenues from India fell by 7%. Europe registered 12% drop in revenues.
At the segment front, Indian business witnessed 45% rise in PBIT at Rs 361.81 crore and constituted 82% of the total segment profit. Segment profit of European operations fell 18% to Rs 85.37 crore.
- The promoters' share in the total shareholding stood at 44.06% in June 2015. Promoters have pledged 5.28% of total shares of the company as against 4.4% a year ago.
- The company announced its earning on 11 August 2015. The stock is trading marginally 2.6% higher at Rs 187 at BSE the following day.