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Apollo Tyres Sees Challenging Times Ahead

In discussing Apollo Tyre’s first quarter results, Onkar Kanwar, Apollo’s Chairman and Managing Director, said,

“These are probably the most challenging times we have faced as a company. The unnatural rise in crude and natural rubber prices, have had a cascading impact across all raw materials. Combined with prices, which are two or three times higher than they were last year, we are facing the added problem of certain essential crude-based raw materials being unavailable even at higher prices. Merely by increasing product prices we will not be able to bridge this yawning gap. The only solution is to look internally, undertaking rigorous efficiency and economy drives across the organisation. That’s the silver lining. I believe this frugality will only strengthen the company in the long run.”

According to Apollo, between June 2007 and July 2008, natural rubber prices rose by 61%, while crude prices are up 111%. Crude-based derivatives like rubber chemicals are costlier by 60%, while polybutadiene rubber is currently experiencing a production crisis, despite a price increase of 115%.

Apollo Tyres reported consolidated revenue of Rs 13.2 billion for the first quarter of FY2008/2009, up 15% from Rs. 11.5 billion in FY2007/2008. Consolidated net profit after tax was Rs. 586.6 million, up 7.3% from the previous year. Despite the challenging conditions, Apollo reported that it was moving forward with plans to build a new greeefield tire plant in Hungary, which is in the regulatory approval stage, and a new plant in India’s Tamil Nadu region, which is under construction.

Here is the discussion of Apollo Tyre’s results. Here are the results.

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