Apollo Tyres Reports Stellar Q2 Performance with Profits Soaring
Apollo Tyres capitalizes on rising auto and tire demand, ensuring a prosperous fiscal year ahead.
In a remarkable turn of events, Indian tire manufacturer Apollo Tyres Ltd. has announced a stellar performance in the second quarter, which has surpassed expectations. The boost in profits can be attributed to increased auto sales and reduced input costs, a testament to the company's resilience and strategic management.
For the quarter ending on September 30, Apollo Tyres reported a consolidated profit that more than doubled, reaching an impressive Rs 474 crore (equivalent to $56.94 million). This significant surge in profits is in stark contrast to the Rs 179 crore earned during the same period in the previous year.
Analysts had predicted a profit figure of nearly Rs 433 crore, according to LSEG data, which indicates that Apollo Tyres not only met but exceeded the market's expectations.
Despite the postponement of the festival season to the third fiscal quarter, analysts had foreseen an upswing in revenue in the September quarter due to price hikes and premiumization, leading to higher realizations, especially in the automotive and auto ancillary sectors.
Furthermore, the initiation of the agricultural season is anticipated to drive a surge in demand for replacement tires in the financial year 2024. Analysts suggest this demand could rise by high single-digit to low double-digit percentages, further bolstering Apollo Tyres' growth prospects.
In terms of revenue from operations, Apollo Tyres witnessed an increase of over 5%, reaching Rs 628 crore. The APMEA (Asia Pacific, Middle East, and Africa) segment, being the largest contributor to revenue, experienced a significant uptick of 4.5%, culminating in a total revenue of Rs 4,473 crore.
In a promising development, the Federation of Automobile Dealers Association announced in early October that India's retail vehicle sales had seen a remarkable 20% increase in September. This surge in sales can be attributed to the easing of monsoon concerns and amplified rural demand, which has significantly boosted market sentiment.
The favorable market conditions were further augmented by declining crude and rubber prices, which are essential raw materials for tire manufacturing. These cost reductions enabled Apollo Tyres to achieve a more than 15% reduction in the cost of raw materials consumed, contributing to their impressive profit margins.
In the backdrop of these strong financials, Apollo's peers, MRF Tyres and Goodyear India, also reported significant profit increases. Higher demand and decreasing operational costs have been key factors driving the positive performance of tire manufacturers.
Despite the remarkable results, Apollo Tyres' stock price experienced a slight dip of 2.3% in the lead-up to the announcement of their quarterly performance. Nevertheless, these results undoubtedly reflect the company's robust financial health and its ability to navigate the challenges of the automotive industry effectively.