Apollo Tyres mulls plants in east Europe, third quarter net down

February 11th, 2011 - 7:22 pm ICT by IANS  

Chennai, Feb 11 (IANS) Truck and car tyres major Apollo Tyres is planning to set up car radial tyre plants in Eastern Europe where labour costs are comparatively low, and go in for backward integration buying rubber plantations, a company official said.”We are looking at geographies like Eastern Europe, Indonesia for new plants. First, we will have our factory in Eastern Europe where the labour cost is low and the factory can run for longer hours as in India,” Chairman Onkar S. Kanwar told reporters here Friday.

However, the Rs.8,120 crore company officials said that the primary task is to stabilise their newly inaugurated plant in Chennai where an additional sum of around Rs.500 crore is to be invested in a couple of months time taking total outlay to Rs.2,100 crore.

“The Eastern Europe project is still in the planning stage. I don’t see us there before a year. The minimum economic size of a car radial plant will be 400 tonnes a day. As a company, we are looking for rubber plantations outside India,” Vice Chairman and Managing Director Neeraj Kanwar added.

He said the Chennai plant is expected to achieve its terminal capacity of 16,000 passenger vehicle and 6,000 commercial vehicle tyres a day by March 2012.

“Normally, the payback period for plants of such size is around five years,” he added.

According to Onkar Kanwar, the company’s board met here and approved the third quarter results.

On consolidated basis, Apollo Tyres closed the third quarter with a total income of around Rs.2,368 crore and a net profit of Rs.120.4 crore as compared to around Rs.2,298 crore and Rs.187.3 crore earned during previous year’s corresponding period.

Officials also cited the strike in the Kerala plant that impacted the topline growth by Rs.600 crore.

According to Neeraj Kanwar, the high rubber prices brought down the profits by 50 percent quarter on quarter.

“Between Dec 2009 and 2010, the rubber prices went up by 37 percent whereas the selling price was increased by 19 percent,” he said.

About the European operations Neeraj Kanwar said that the company is shipping out 50,000 tyres per month to be sold in Germany, Italy, UK and Netherlands.

“The European market is good for the winter passenger car tyres and we made good margins there. On the other hand the South African operations were hit by strike and the topline growth was two percent,” he said.

The company targets to grow its export revenue to 20 percent, up from the current 10 percent.

With fresh capacity getting added, the company is in discussions with vehicle manufacturers like BMW, Mercedes, Audi and others for supplies.

“Our sales mix consists of 22 percent to vehicle manufacturers, 10 percent exports and the balance from the replacement market,” remarked Neeraj Kanwar.

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