Apollo Tyres Ltd
May 2009
2
Industry Highlights India
Industry Highlights South Africa
Significant events
Key statistics
Outlook
Apollo Snapshot
3
Significant Events• Reduced demand in wake of global slowdown
– Sharp reduction in OE demand starting September 2008 – production cuts implemented by major OEs
– Industry forced to take production cuts in Q3– Situation improved slightly in Q4
• Collapse of credit market – Liquidity crunch post Lehman debacle
• Soaring Raw Material (RM) Prices– Rubber at Rs. 130/ Kg for good half of CY 2008 – peaked
at ~ Rs.137/ Kg in September 2008– Crude crossed $100/ barrel in Feb 2008 – touched an all
time high of ~ $145/ barrel in July 2008– Rubber after experiencing a significant fall in Q4,
increased to Rs.100/kg by quarter end; softening of crude in Q4
4
Significant Events• Profits declining
– Price increase taken but insufficient to counter the raw material cost impact
– Production cuts resulting in relatively higher fixed overheads
– Improvement in Q4 due to pick up in demand and softening of raw material cost
• Strengthening of Dollar– Up from an average Rs.40.0 in FY 2008 to Rs.46.5 in FY
2009 – Industry a net importer – adverse impact on profitability
• Measures taken by the Government– License required to import Truck Bus Radials (TBR) in
Nov 2008– Excise duty cut by 4% in December ’08 and 2% in
February ’09
5
Key Statistics
Mn No.CAGR (5 years)
Growth FY 2009
Truck & Bus* -1.4% -32.4%
Light Truck 13.5% -10.5%
Passenger Car 12.2% 9.6%
Vehicle Sales
Tyre Sales
Mn No.
CAGR (5
years)Growth
FY 2009
Truck & Bus 7.2% 0.6%
Light Truck 6.5% 0.1%
Passenger Car Radials (PCR) 12.3% 13.1%
* 5 Year CAGR in FY ’08 : 15%
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Apollo, 16%
MRF, 24%
JK, 20%
Ceat, 3%
Goodyear, 13%
Bridgestone, 20%
Others, 3%
Apollo, 28%
MRF, 22%JK, 19%
Ceat, 7%
Birla, 4%
Others, 19%
Apollo, 27%
MRF, 22%JK, 20%
Ceat, 14%
Birla, 15%
Others, 3%
Key Statistics
Presence of Large PlayersPresence of Large Players
Truck and Bus Tyres FY 09
PCR Tyres FY 09Light Truck Tyres FY 09
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Outlook
+ -• RM prices coming off
– Expected to remain stable at Q4 2009 level in 1st half of FY 2010 and then move upwards
• Signs of improvement in OE & Replacement demand
• Global meltdown expected to continue– Slowdown in economic
growth– Liquidity crisis
• No consensus on Dollar – Rupee parity. No significant movement expected
8
Industry Highlights South Africa
Industry Highlights India Significant events
Key statistics
OutlookApollo Snapshot
9
Significant Events• Industry affected by high raw material prices and
reduced demand– Replacement market under pressure due to lower
consumer spend and liquidity crunch– Exports affected due to global recession
• Production cuts - Truck and Mining tyres the most affected segment
• Currency depreciation against US$– US$ moved up from an average R7.1 to R8.8 in FY 08-
09. Average for Q4 at R10.0– Costlier imports - benefiting the domestic industry;
offset by higher raw material prices
• Interest rate touched a peak of 15.5%; down to 12.0% now
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Key Statistics
Apollo, 19%
Imports, 38%
Other Manufacturers, 43%
Apollo, 14%
Imports, 24%
Other Manufacturers, 62%
Apollo, 18%
Imports, 43%
Other Manufacturers, 38%
Presence of Large PlayersPresence of Large Players
Truck and Bus Tyres CY 08
Light Truck Tyres CY 08 PCR Tyres CY 08
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Outlook+ -
• RM prices coming off– ~ 15% reduction expected in
Q1 FY 2010– Expected to remain at similar
level in Q2 & Q3 and then move upwards
• Market share shifting from imports to local manufacturers due to weaker currency
• Infrastructure projects on account of FIFA World Cup
• Profitability under pressure– Unfavorable demand
supply situation
• Volatility in currency expected to continue
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Business highlights
Recent Development
Financial highlights
Shareholding information
Looking ahead
Industry Highlights South Africa
Apollo Snapshot
Industry Highlights
13
22
26
43
47
50
-
10
20
30
40
50
60
FY 05 FY 06 FY 07 FY 08 FY 09
Rs
. Bn
Business Highlights
Consolidated Top Line
CAGR – 22%
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Business Highlights
Revenue Segmentation
Replacement, 74%
OE, 14%
Exports, 11%
Truck, 64%Light Truck, 11%
PCR, 16%
Farm, 7% Others, 2%
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Business Highlights
• Close to Customers - wide distribution network– India
• 4000+ dealers• Largest number of exclusive dealers (2100+)• Special Networks : Apollo Radial World (190+) &
Apollo Pragati Kendra (60+)• Strategic distribution partnership : Reliance
Petroleum, ONGC & Tata Motors– South Africa
• 600+ dealers• Special franchisees (200+ Dunlop Accredited
Dealers)
Distribution Strength Distribution Strength
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Recent Development
Announced acquisition of Vredestein Banden B.V., a €300+ Mn Company with manufacturing base in Netherlands, and
operations all over Europe
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Recent Development
Manufacturing Facility
• Manufacturing Plant at Enschede, Netherlands (2 hours from Amsterdam), close to Dutch/German border
• Capacity : 5.5 Mn units p.a
• Manpower : 1,500+
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Recent Development
Rationale
• Continuation of our journey to become a global player - $2 Bn target
• Entry into European Market– Presence with a manufacturing site – Access to existing marketing and distribution network
• Leveraging on “Vredestein” brand positioning in Europe
• Enhancing export sales from India using “Vredestein” brand (South East Asia)
• Upgradation in PCR Technology/ Automation
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46,912
6,088
49,841
-1,088 -2,072
Financial Highlights
Sales growth led by price improvement
Volumes (-4.4%)
Price Mix (+13.0%)
+6.2%
Consolidated Net Sales : FY 2008/ FY 2009(Rs. Mn)
FY 2008 FY 2009
Others (-2.3%)
Revenue Bridge (Consolidated)
20
47
50
45
46
46
47
47
48
48
49
49
50
50
51
Rs.
Bn
5.7%
2.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
%
Financial Highlights
FY 2008
FY 2009
Net Sales EBIDTA Margin
Net Profit Margin EPS
6.2%
13.1%
8.8%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
%
5.7
2.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Rs
.
21
Financial Highlights
Balance Sheet Size Net Debt
20.0
24.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Rs.
Bn
3.6
5.3
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Rs.
Bn
FY 2008
FY 2009
22
0.7
0.5
0.3
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Rat
io
17.1%
24.6%
13.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Rat
io 14.9%
25.5%
10.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Rat
io
1.4
0.8
1.0
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Rat
io
Financial HighlightsNet Debt to Equity
ROCE ROE
Net Debt to EBIDTA
FY 2008
FY 2009
FY 2007
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Shareholding Information
Promoters, 39%
FIs/ Banks/ Mutual Funds, 18%
Public, 26%
FIIs/ NRIs/ Foreign Bodies Corporate, 15%
Govt of Kerala & Others, 2%
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Looking Ahead
• Aggressively pursue market shares in India and South Africa Market
• Focus on TBR capacity in India
• Focus on integration of Vredestein Banden B.V.
Thank You