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Informist, Thursday, May 15, 2025

 

By Sunil Raghu

 

AHMEDABAD – Apollo Tyres Ltd. is hoping to make a comeback from the June quarter and FY26 by achieving a double digit sales growth, after a challenging year in FY25. The company expects a recovery in operating performance, helped by better topline momentum across both India and Europe geographies, the management told analysts in a post-earnings call Thursday. 

 

High input costs and underperformance in sales dragged the consolidated net profit of Apollo Tyres Ltd. to INR 1.85 billion in the quarter ended March, down over 45% sequentially as well as on year. With the Jan-Mar financial results, the company has witnessed a fall in profit for five consecutive quarters now. Analysts had anticipated the tyre manufacturer's profit to fall in the reporting quarter but the final profit figure was way lower than the expectation of around INR 2.97 billion. The company's profit for Jan-Mar was lower than even the lowest net profit estimate of INR 2.69 billion.

 

"This (FY25) has been a very very challenging year and honestly our performance has not been where we aim to be. We have underperformed vis-a-vis our expectations and peers, both in India and in Europe," Neeraj Kanwar, managing director and vice-chairman, Apollo Tyres, told analysts. He said the company had faltered on original equipment segment wherein they supply directly to vehicle manufacturers and in areas of exports. He attributed the fall in sales of original equipment tyres to conscious decision of moving out of certain sizes of tyres, which hit volumes.

 

Kanwar said that the "green light" is that they have put a lot of initiatives in the field, which with their robust replacement would help Apollo achieve "much much better performance" in Apr-Jun, even compared with its peers. "Apollo will be back in a full swing in Apr-Jun and in FY26," Kanwar said, adding that he hoped the company would be back to achieving a double-digit growth.

 

Apollo Tyres' consolidated revenue from operations grew only 2.6% to INR 64.24 billion in the March quarter, with Europe accounting for nearly 29% of the consolidated revenue for the Gurugram-headquartered tyremaker. Sales in Europe fell to 176 million euros in the March quarter from 182 million euros in the March quarter lat year.

 

The tyremaker also announced its intent to discontinue tyre production at its Enschede plant in the Netherlands by 2026, primarily on account of rising production costs and market changes. The company hopes this to result into substantial savings.

 

The company management also announced that it would spend INR 15 billion in FY26 as capital expenditure, for growth as well as in normal operations, with focus on generating free cash flow, improving profitability and returns.

 

On being asked why the company has cut down on capex intent of INR 20 billion that it had announced earlier, Gaurav Kumar, chief financial officer of Apollo Tyres, said they had decided to go slow on capex due to volatility and uncertainty. He said the company continues to be judicious and if market conditions change, their plans could change. The pace of capex has been curtailed and not the volume, he said. The growth capex would be invested in expanding its passenger car tyre capacity by 4,000 tyres per day each at Hungary and Andhra Pradesh plants. Apollo Tyres is expanding capacity at its Gyngyshalsz plant in Hungary, which seeks to address the high utilisation rate in its passenger car radial tyre segment, currently stated to be over 90% in Europe.

 

On impact of proposed tariffs by Trump administration on company's plans to expand sales in the US markets from European facilities, the company said that it was too early to predict for now but even if there is an impact it would be a ‘small' one. Currently, the US makes no more than one-third of the total passenger car tyres required by it within the country, thereby importing nearly two-thirds of its tyre needs. For Apollo, US sales amount to just about $100 million, of the total revenue of $3 billion, Gaurav Kumar said. Of the US sales, only 40% comes from Apollo Tyre's European facilities.

 

"Once the dust settles and there is clarity on tariffs on different geographies, there may be shift in competitiveness of different geographies...So far, we have not taken any stance but shall wait for dust to settle down," Kumar added. He said does not see any collateral damage to European markets due to any closure of sales to the US as most of the tyres the US imports come mainly from Asia, South America and Mexico.

 

On Thursday, shares of Apollo Tyres ended at INR 480.45 on the National Stock Exchange, up 1.1%.  End

 

Reported by Sunil Raghu

Edited by Akul Nishant Akhoury

 

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