Apollo Tyres will increase its capital expenditures in the coming fiscal year

Indian tire manufacturer Apollo Tyres plans to invest approximately Rs 2,600 crore in its production this and next fiscal year. The company said demand continues to grow, with production utilization at its factories ranging from 85% to 90%. In the first half of the current 2020-2021 fiscal year, it has invested about Rs 600 crore in production development.

According to the management of Apollo Tyres, capital investments in Europe should be between 25 and 30 million euros per year.

The company's vice chairman and managing director, Neeraj Kanwar, said the company is now approaching the end of its current investment cycle. In the future, the focus will be on the efficient use of assets. Apollo expects capex to decrease over the next few years, which, coupled with a rebound in demand, should help the company gain free cash flow and reduce its leverage. “We are aware of the fact that capital expenditures have been high over the past few years and that, combined with today's weakening in demand, has affected the profitability ratio,” he added. "We are focused on getting the profitability ratio back to normal and we expect this to happen over the next few years."

Regarding the recovery in demand, Niraj Kanwar noted that the positive trend continues. Growth was seen in both OE and replacement tire markets, which, combined with lower raw material and production costs, helped the company even more. Apollo predicts tire demand will continue to grow in the fourth quarter of fiscal 2020-21.

Apollo Tyres CFO Gaurav Kumar said the company had sales for the quarter of Rs 2,900 crore, up 5% year-on-year and 66% more than in the previous quarter. He claims that Apollo has been able to increase its market share in the passenger car and agricultural tire segment.