Higher sales at the Indian tyre group Apollo Tyres were wiped out by a 40% rise in raw material costs in the company’s fiscal second quarter, leading to a fall in net profits.
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Consolidated revenues rose 16.3% year on year to INR12.6bn. Consolidated net profit after tax fell 74% to INR151m.
Stand-alone India operations revenue was up 16.1% to INR9.8bn while net after tax profit fell 85% to INR78m.
Gains from higher sales were negated completely by a 40% rise in raw materials cost, the company said in a statement.
Chairman Onkar Kanwar said: “It has been a testing quarter for the company and us as an industry, but I do believe that the worst might be behind us and it’s time to plan for the future. The positive that I take from here is a consistent growth in sales, especially in South Africa, where we are able to now reap the benefits of our manufacturing and marketing excellence with a near 30% sales growth this quarter.”
For the first six months, consolidated revenues were up 16% to INR25.8bn. Net profit after tax fell 34% to INR737.6m.
“The clear learning from H1 has been that we can protect customers and absorb dramatically higher raw material costs, by enhancing internal efficiencies, only to a limited extent. The sharp fall in profits, despite higher sales, makes a strong and rational case for price hikes this quarter. It is not an option, but a requirement to ensure that fresh investments being made, for products required by the Indian customer, continue to remain on course,” added Kanwar.
