KOCHI, India (July 18, 2008) — Though profits were up for Apollo Tyres Ltd. for the quarter, escalating prices are causing what one executive called “one of 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, according to Onkar S. Kanwar, chairman and managing director.
Combined with prices, which are two or three times higher than they were last year, the company is facing the added problem of certain essential crude-based raw materials being unavailable even at higher prices, he said.
Kanwar said merely increasing product prices will not be enough to bridge this yawning gap. The only solution is to look internally, undertaking rigorous efficiency and economy drives across the organization.
He said oil prices rose by 118 percent, natural rubber by 62 percent and rubber chemicals by 30 percent. He said the Indian tire industry's input costs rose by 30 percent in the last year.
Kanwar said Apollo's plan to build a green field tire factory in Hungary is progressing through regulatory approval, while the new factory in India's Tamil Nadu is in the construction phase.
The company reported its results for the three months ended June 2008. Consolidated revenue was $308.5 million up 15 percent from a year ago.
Consolidated net profit after tax was $13.7 million up 7.3 percent. Standalone India Operations revenue stood at $250 million up 23 percent. Standalone India Operations net profit after tax at $11.3 million up 4 percent. Sharp rise in prices of raw materials precipitated price corrections across products.