New Delhi: Apollo Tyres Ltd – one of the country’s largest tyre manufacturers – on Tuesday reported 7.2% year-on-year decline in consolidated net profit to ₹77.8 crore for the quarter ending March 31, on account of subdued demand for its products in India and European markets. The company reported a net profit of ₹83.99 crore in the corresponding period last fiscal.
Due to tepid demand for vehicles across geographies, the revenue from operations declined significantly by 15.5% to ₹3,610.13 crore. The operating profit or earnings before interest, tax depreciation and amortization (EBITDA), remained flat at ₹473 crore due to the substantial reduction in raw material cost as the company resorted to production cuts during the period to correct supply demand mismatch.
Vehicle manufacturers and their component suppliers had to close their factories from 22 March, following the lockdown announced by the union and state governments to contain the spread of the Covid-19 pandemic. Apollo Tyres also had to shut its factories in other countries in Europe, either partially or fully, due to the pandemic.
The Gurugram-based company witnessed 35.5% increase in depreciation and amortization cost and 110.18% increase in finance cost due to the increase in debt on the balance sheet. The net profit during the quarter also got a boost from the sharp fall in taxes paid by the company.
According to Onkar S. Kanwar, chairman, Apollo Tyres Ltd, along with the demand in the replacement market, the company saw some improvement in demand from original equipment manufacturers (OEMs) in the fourth quarter, before the widespread disruption caused by Covid-19 which put the company in an uncharted territory.
“Our teams across geographies have shown great resilience and adaptability in this difficult situation; various actions have been taken at our operations around the world to protect our people and to ensure business continuity under these circumstances. With lockdowns easing, the demand has started picking up gradually across product and market segments, giving us some relief," added Kanwar.
Overall, in FY20, Apollo reported a whopping 29.9% drop in net profit to ₹476.39 crore, as a result of a 6.96% decline in revenues to ₹16326.99 crore. American private equity firm Warbug Pincus invested ₹1080 crore in Apollo Tyres during the fiscal year and the company will be able to reduce its debt significantly as result of the investment.