Apollo Tyres to cut FY20 and FY21 capex by Rs 600 crore on poor demand from OEMs

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Published: November 21, 2019 12:47:06 AM

Similarly, for our European operations, there was no growth capex being incurred, only maintenance capex would be incurred, he said, adding the company expects to invest €40 million in the European operations this year and €25 million in the next.

The current utilisation levels in India are just short of 80%, given the market situation, that has come down by almost 5% to 10% points, across product categories, he said.The current utilisation levels in India are just short of 80%, given the market situation, that has come down by almost 5% to 10% points, across product categories, he said.

Apollo Tyres has decided to cut capital expenditure to the tune of Rs 600-Rs 300 crore each in 2019-20 and 2020-21, owing to continued slowdown in the Indian automotive sector, particularly poor offtake from OEMs.

Hit hard by 60% drop in its truck OEMs’ volume and 40% drop in passenger car OEMs’ volume in the past few months, the company has decided to scale down its investments in the current and next fiscal.

Apollo Tyres chief financial officer Gaurav Kumar, in his latest investor/analyst call post Q2 results, said: “We would cut capex of close to Rs 600 crore over the current year and next year, and defer it out. For FY20, as against earlier decision to invest Rs 2,700 crore, it will be now brought down to about Rs 2,300-2,400 crore and as against original proposal of Rs 1,700 crore investment in 2020-21 fiscal, it would be down by another Rs 300 crore.”

Similarly, for our European operations, there was no growth capex being incurred, only maintenance capex would be incurred, he said, adding the company expects to invest €40 million in the European operations this year and €25 million in the next.

Kumar said the truck volumes were down 14% and the car volumes were down 11% in this quarter. The degrowth essentially on the truck side was pretty much OEMs sale.
“We had positive growth both in replacement and exports. So, the OEM volumes were down close to 60% in truck side and about 40% in passenger car side,” he pointed out. “The overall tonnage was down by about 13% as against a top line degrowth of 10.8%.”

He also said, “Currently, we must execute the plan we have, which is full utilisation of plants in India and abroad. Making margins, getting the debt levels down before we can think of expansion in Hungary plant. Given our capex spend and the profitability, the net debt increased to just short of Rs 5,900 crore.”

According to him, though it is too early, the company thinks the situation may have bottomed out.

The current utilisation levels in India are just short of 80%, given the market situation, that has come down by almost 5% to 10% points, across product categories, he said.

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