Apollo Tyres net rises, sees tough times ahead
NEW DELHI (Reuters) - Apollo Tyres' quarterly profits rose by over a third, helped by sales of high-margin products, but the tyre maker is bracing for tough times ahead, mulling price hikes as rising input costs weigh.
Prices of key raw materials for tyres have shot up. Rubber is edging towards a key 310-yen per kilogram level, and crude oil has raced past $124 a barrel.
"The improvement in our profitability ratios is heartening, but tough times stare us in the face with all-time highs in almost all our raw materials, inflation and the spectre of a global slowdown," Chairman Onkar Kanwar said in a statement.
With input costs rising, "there might be no alternative to product price increases," the company said in the statement. Raw material costs make up 70 percent of a tyre's price.
Rising raw material prices sliced off about 200 basis points of Apollo's operating margins, from a quarter ago, Sunam Sarkar, chief of corporate strategy and marketing, told Reuters over the telephone.
"Margins are under severe pressure because of the raw material push," Sarkar said, adding he did not expect rubber prices moderating on the government's suspension of trade in futures for four months in a bid to tame prices.
"Demand remains strong, and there is a production which is a finite quantity," he said.
Shares of Apollo closed 6 percent down at 43.60 rupees in a weak Mumbai market.
