The company witnessed big drop in margins. Big surge in other income and big drop in tax provision restricted further drop in net profit.

Commenting on the results, Apollo Tyres Chairman Onkar S Kanwar said despite challenges in the last fiscal, all the key operations of the company have done well."Raw material prices, which have increased sharply quarter-on-quarter, continue to pose challenges for us, and have impacted our margins. Truck radial segment grew in India in the fourth quarter but it has been impacted by dumping of low cost tyres, especially from China, through the year.There has been a healthy volume growth in the passenger vehicle segment across geographies in the past fiscal," he added.

Quarterly Performance

The company witnessed increase in the raw material cost(inclusive of purchase of stock in trade) during fourth quarter ended March 2017 with increase in rubber price on yoy basis. The raw material cost as % of sales net of stock adjustments rose590 bps to 57.2%. The employee cost fell 150bps to 12.08% in Q4 FY 16-17. Other expenses rose 40 bps to 19.8%. Resultantly, operating margins slipped 540 bps 11.1%. Operating profit fell 25% to Rs369.9 crore on a y-o-y basis.

Natural rubber prices now threaten margins of domestic tyre producers. Domestic prices of natural rubber, which makes up more than 50% of the cost of a tyre ranged between Rs 117-133 per Kg during Q3 FY 17. The international prices began rising in December 2016. The international prices at around Rs 165 per kg, is Rs 10-20 above the Indian prices, making imports unviable. The output in largest producing country, Thailand, is down. It has been made up to a certain extent by the mounting production in Vietnam. The domestic prices already touched Rs 160 per kg in late February 2017, and later marginally came down to Rs 154 per kg early March 2017. As of Mar 2017, domestic prices are 70% higher and international prices were almost double on yoy basis.

With 144% rise in other income to Rs49.98 crore, PBIDT fell 19% to Rs419.88crore. Interest cost rose 3%to Rs24.79 crore. Depreciation cost increased 13% at Rs136.57crore. Thus, PBT before EO registered 30% dropto Rs258.52 crore. After considering 1440 bps decrease in the effective tax rate at around 11.7% and 69% drop in tax provision, PAT fell 16% at Rs228.22 crore.

During the quarter, the company earned 65% and 24% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas)respectively. Revenues from APMEA rose 9%. EA registered 16% rise in revenues. The other segment comprising of other business entities which constitutes 12% of overall revenues, registered 176% rise in income.

At the segment front, APEMA business witnessed 35% drop in PBIT at Rs229.99crore and constituted 81% of the total segment profit. Segment profit of EA operations rose 49% to Rs37.55 crore and constituted 13% of segment profit. Profit from other segment stood at Rs 16.68 crore, rise of 35%.

Yearly Performance:

For the year ended March 2017, the company posted 11% rise in net income to Rs13180 crore but 2% drop in net profit to Rs1099.29 crore.

The raw material cost together with purchase of stock as % of sales net of stock adjustments rose 290 bps at 53.1%. The employee cost dropped 30 bps at 12.9%. Other expenses rose 50 bps to 20.1%. Resultantly, operating margins slipped 290 bps to 14%. Operating profit fell 8% to Rs1846.42 crore on a y-o-y basis.

With 127% rise in other income to Rs154.13 crore, PBIDT fell 3% to Rs2000.55 crore. Interest cost rose 11% to Rs102.88 crore. Depreciation cost increased 8% at Rs461.81 crore. Thus, PBT before EO registered7% drop at Rs 1436 crore. Last year the company incurred an EO income of Rs 47.7 crore. Hence PBT after EO fell 10% at 1435.86 crore. After considering 590 bps decrease in the effective tax rate at around 23.44% and 28% drop in tax provision, PAT fell 2% at Rs1099.29 crore.

During the year, the company earned 63% and 27% of its revenues from APMEA (Asia Pacific, Mid East and Africa) and EA (Europe Americas) respectively. Revenues from APMEA rose 2%. EA registered 36% rise in revenues. The other segment comprising of other business entities which constitutes 9% of overall revenues, registered 125% rise in income.

At the segment front, APEMA business witnessed 14% drop in PBIT at Rs1178 crore and constituted 77% of the total segment profit. Segment profit of EA operations rose 26% to Rs304 crore and constituted 20% of segment profit. Profit from other segment stood at Rs46.33 crore, rise of 126%.

On the outlook, the company is looking forward to a good volume growth in the current fiscal on the back of tyres rolling out the new Hungarian plant and also from the expanded truck-bus radial facility in Chennai.The company is also eyeing a gradual increase in market share in Europe over the next few years.

The stocks is trading around Rs 238 at BSE currently.