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Apollo's 1Q net sales rise 55%; profit is up, too

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Apollo Tyres Ltd. recorded net income of 771 million rupees on consolidated net sales of 28.2 billion rupees for its first quarter ended June 1, 2011. That compares to profits of 742 million rupees on sales of 18.2 billion rupees for the same period last year.

Based on the exchange rate on June 30, 2011, Apollo posted net income of $17 million on sales of $622.4 billion for the first quarter of its 2011-2012 fiscal year. That's an income-to-sales ratio of 2.7%.

The company's operating income was up 20%, from 2 billion rupees to 2.4 billion rupees.

Profits would have been higher if not for "all-time high" natural rubber prices and sluggish growth in some of the major markets (especially South Africa) in which it competes, according to the company. The increased in tire imports from China also significantly affected profitability.

"This will be yet another difficult year for us," says Onkar Kanwar, Apollo's chairman. "In our largest market in India, inability to raise prices in time is having an adverse impact on all Indian tyre manufacturers. Some of the players have already posted negative results, and this will influence overall investments in the sector.

"Europe continues to do well, despite high raw material prices. However, government inaction on large scale import of tires into South Africa is taking a toll on the tire manufacturing industry. What has further contributed to the situation is the high cost of manufacturing and recurring wage negotiations in South Africa.

"However, I continue to remain optimistic about the company's ability to negotiate these challenges, especially given the multiple actions we have already deployed across geographies, to increase internal efficiencies," he adds.

Sales in India account for 69.4% of total sales. "Other" countries, which includes the United States, accounts for less than 1%.

At the 38th annual General Meeting, shareholders approved the annual dividend payout of 50% per share for the year ended March 31, 2011. For a look at Apollo's financial results for fiscal 2010-2011, which ended March 31, 2011, click on "Despite 'challenging' year, Apollo profits."

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