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Despite 'challenging' year, Apollo profits

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Apollo Tyres Ltd. posted net profit of 4.4 billion rupees on net sales of 88.6 billion rupees for its fiscal year ended March 31, 2011. That compares to profit of 6.5 billion rupees on sales of 81.2 billion rupees for its previous fiscal year.

Based on the exchange rate on March 31, 2011, Apollo recorded a net profit of $99.2 million on sales of $2 billion for its 2011 fiscal year. Its income-to-sales ratio was nearly 5%.

“This has been an extremely challenging year of spiraling raw material prices, especially natural rubber, and closures for over a quarter in one of our Indian plants, and an industry-wide strike in South Africa,” says Chairman Onkar Kanwar.

“These resulted in production and sales losses. Despite these, we have registered a very positive revenue growth across all our operations.”

In the fourth quarter, Apollo posted net profit of 1.9 billion rupees, down 27% from the fourth quarter of fiscal 2010. Net sales rose 27%, to 27.3 billion rupees.

“The cost push has impacted our bottom line,” says Kanwar. “While price increases have been resorted to, the lag effect impacts margins.

“This trend of high prices is expected to continue for the next few months. More importantly, it is also availability of natural rubber that is currently a cause of concern.”

Winter tire sales in Europe were “exceptionally strong” for both Apollo and Vredestein brand tires, according to the company. (In June 2010, Apollo launched its summer and winter tires in Europe, which accounted for 25% of the company’s sales. India represents 62%; South Africa represents the remaining 13%.)

Apollo’s board of directors recommended a dividend payout of 50%, subject to approval at the forthcoming annual general meeting.

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