Apollo Tyres forecasts FY2016 to be challenging, plans to expand global footprint

A slowdown in large automotive markets like China and the prevailing currency instability across Europe would weigh on Apollo Tyres in FY2016. However, a likely pick-up in domestic demand and the tyremaker’s efforts to expand its global footprint would help it steer through the rough seas ahead, said chairman, Onkar S Kanwar, in his speech at the company’s 42^nd Annual General Meeting held in Kochi today.

Even as a fall in rubber prices due to declining crude prices has augured well for the Indian tyre industry, the constant threat of cheap imports from China and slow demand from specific segments like agriculture has capped its growth.

According to a recent report from rating agency ICRA,  domestic tyre demand grew by 10-12% during 2014-15 supported by 7-7.5% growth in the Original Equipment Manufacturer (OEM) segment and 12-15% growth in the replacement segment.

Despite this, signs of a pick-up in domestic demand and higher margins would make sure the growth trend for Indian tyre companies remains intact and manufacturers are expected to post a 7-8% rise in their net revenues in the current financial year.

Apollo Tyres is all set to face the challenges ahead by expanding its global presence in order to improve long term sustainability, said Kanwar.

Under this strategy, the company has commenced construction of a new plant in Hungary which will be operational by 2017 and has also envisioned the use of its Singapore facility as a key base for global procurement, integrated supply chain, commodity trading and hedging, treasury operations and strategic initiatives.

“As in the past, we continue to invest ahead of time to ensure that we have sufficiently profitable market opportunities available to us to sell our enhanced production into,” he added.

The company also reported its April-June results today, and posted a 27% rise in net profit during the quarter, owing to a sharp fall in cost of raw materials. 

Also read: Apollo Tyres Q1 net profit jumps 27% on falling input costs