Why did Apollo Tyres see such a sharp fall in the net profits in Dec-21 quarter?
Answer
Answer
Let me first talk about the top line numbers of Apollo Tyres. Sales grew 9.87% yoy at Rs.5,707 crore in the Dec-21 quarter. There was growth in tyre sales across key regions despite weak auto OEM demand on account of production cuts due to microchip shortage. APMEA region saw sales growth of 11.2% at Rs.3,834 crore while sales in Europe were up 10.9% at Rs.1,982 crore. ROW sales were sharply up 41.9% at Rs.1,138 crore.
Apollo Tyres
Rs in Crore
Dec-21
Dec-20
YOY
Sep-21
QOQ
Total Income (Rs cr)
₹ 5,707.47
₹ 5,194.66
9.87%
₹ 5,077.32
12.41%
EBITDA (Rs cr)
₹ 398.66
₹ 702.92
-43.29%
₹ 298.33
33.63%
Net Profit (Rs cr)
₹ 83.33
₹ 171.46
-51.40%
₹ 45.44
83.38%
Diluted EPS (Rs)
₹ 3.52
₹ 7.01
₹ 2.74
EBITDA Margin
6.98%
13.53%
5.88%
Net Margins
1.46%
3.30%
0.89%
Operating profits for the Dec-21 quarter fell -43.29% at Rs.398.66 crore on input cost pressures. There was a sharp fall in operating profits from the APMEA region and ROW region. However, Europe operating profits were up 98% yoy. The quarter saw a 28% spike in material costs and a jump in other expenses. Operating margins fell sharply from 13.53% in Dec-20 to 6.98% in Dec-21 quarter. OPM was higher sequentially by 110 bps.
Net Profits were lower by -51.4% at Rs.83.33 crore as the operating performance got transmitted to bottom line. This also negatively impacted the debt service coverage ratio and interest coverage ratio in the quarter. The sharp rise in the price of crude and other chemicals that go into the manufacture of tyres were the key reason for the halving of net profits in the Dec-21 quarter.
PAT margins more than halved yoy from 3.30% in the Dec-20 quarter to 1.46% in the Dec-21 quarter. However, net margins were higher on a sequential basis by 57 bps.