Slowdown Fails To Deflate Apollo

Despite the pressures of a fluctuating and sluggish market, Apollo Tyres Ltd has managed to perform satisfactorily since 1994-95. During the year 1997-98, the company's sales turnover decreased by over 3 per cent compared to 14.2 per cent in the previous year.

However, despite the fall in sales turnover, the company recorded significant increase in its profit growth. The company achieved this feat by better management of manufacturing and operating costs. These successful efforts are reflected in the decreased total expenditure, interest and depreciation burden.

Lower performance in sales turnover was mainly due to sluggish market conditions faced by the automobile industry. Though sales realisation from automobile tyres decreased by 4 per cent, sales realisation from automobile flaps and automobile tubes increased by nearly 15 per cent and more than one per cent, respectively, during the year.

 

By virtue of better management of raw materials, the company's total expenditure declined by nearly 6 per cent during the year compared to nearly 14 per cent increase in the previous year.

Interest burden declined by nearly 8 per cent and depreciation increased by only 10 per cent compared to nearly 37 per cent in the previous year.

All these have reflected in the bottomline of the company.

During 1997-98, profit before tax increased nearly 30 per cent. In spite of 145 per cent increase in its tax burden, the profit after tax of the company recorded a growth of 12 per cent compared to 2.9 per cent in the previous year.

The profitability ratios of Apollo Tyres, hence, improved significantly. Its EPS increased to Rs 13.54 from Rs 12.16 in the previous year, while net profit margin to sales increased from 2.57 per cent to 2.98 per cent, return on net worth increased from 14.85 per cent to 14.93 per cent and return on capital employed also increased from 20.6 per cent to 20.9 per cent.

In the first quarter of the current year, the company could not maintain its performance trend of the last year. Sales turnover decreased by nearly 11 per cent to Rs 687 crore from Rs 770.6 crore in corresponding period of the previous year, while profit after tax decreased by nearly 17 per cent.

However, the slackness in the company's performance in the first quarter of the current year was consistent with the performance of the tyre industry as a whole.

According to a survey, the production of truck and bus tyres has declined by 9 per cent in the first quarter of the current fiscal. During the period, due to lock-out in the company's Kochi plant from December 1 to 12, 1997, the company's truck and bus tyre production declined to 2.35 lakh tyres from 3.10 lakh tyres in previous corresponding period.

Apollo Tyres, flagship of the Raunaq Singh group, was incorporated in 1972. The present owner acquired it in 1974 and started producing automobile tyres in 1977. Its plants are located at Perambra and Kochi in Kerala, Baroda in Gujarat and Pune in Maharashtra.

It is the first Indian company to have an ISO 9001 accreditation for its entire product range.

The products of the company are manufactured in technical collaboration with General Tyre, USA which is owned by the fourth-largest tyre manufacturer in the world, Continental AG.

According to a recent survey by the European Tyre Journal, Apollo Tyres has emerged as the fastest growing tyre company in India and seventh fastest in the world. Small wonder then that the company has captured 23.2 per cent of market share in truck tyre segment. It also enjoys nearly 18 per cent market share in light commercial vehicles tyre segment.

The company expects to capture 10 per cent market share for radial passenger car segment.

To achieve market strength, the company recently took over Premier Tyres and Stallion Tyres.

The company's export were mainly routed through its subsidiary Apollo International Ltd. But it has ceased to be the subsidiary of the company due to dilution of its holding to below 15 per cent. Hence the export performance of the company was reflected in the annual report of 1997-98.

For the period 1998-2000, the company has planned an expansion programme with an outlay of Rs 395 crore.