Apollo Tyres Ltd

May 2009
 Industry
Highlights India
 Significant events
Industry Highlights  Key statistics
South Africa
 Outlook
Apollo Snapshot

2
 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
3
 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

4
Key Statistics
Vehicle Sales

CAGR (5 Growth
Mn No. years) FY 2009
Truck & Bus* -1.4% -32.4%
Light Truck 13.5% -10.5%
Passenger Car 12.2% 9.6%
* 5 Year CAGR in FY ’08 : 15%

Tyre Sales

CAGR (5 Growth
Mn No. years) FY 2009

Truck & Bus 7.2% 0.6%

Light Truck 6.5% 0.1%

Passenger Car
Radials (PCR) 12.3% 13.1%
5
Key Statistics
Truck and Bus Tyres FY 09

Others, 3%
Birla, 15% Apollo, 27%

Ceat, 14%

MRF, 22%
JK, 20%

Light Truck Tyres FY 09 PCR Tyres FY 09

Others, 3%
Others, 19% Apollo, 16%
Apollo, 28% Bridgestone, 20%

Birla, 4%

Ceat, 7%
MRF, 24%
Goodyear, 13%

JK, 19% MRF, 22% Ceat, 3%

JK, 20%

Presence of Large Players

6
 Outlook

+ -
• RM prices coming off • Global meltdown expected
– Expected to remain stable at to continue
Q4 2009 level in 1st half of – Slowdown in economic
FY 2010 and then move growth
upwards – Liquidity crisis
• Signs of improvement in • No consensus on Dollar –
OE & Replacement Rupee parity. No significant
demand movement expected

7
Industry Highlights
India
 Significant events
Industry Highlights
 Key statistics
South Africa
 Outlook
Apollo Snapshot

8
 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
9
Key Statistics
Truck and Bus Tyres CY 08

Apollo, 18%

Other Manufacturers,
38%

Imports, 43%

Light Truck Tyres CY 08 PCR Tyres CY 08

Apollo, 14% Apollo, 19%

Other
Manufacturers, 43%

Imports, 24%

Other Manufacturers,
62%
Imports, 38%

Presence of Large Players

10
 Outlook
+ -
• RM prices coming off • Profitability under
– ~ 15% reduction expected in Q1 pressure
FY 2010
– Unfavorable demand supply
– Expected to remain at similar
level in Q2 & Q3 and then move situation
upwards
• Volatility in currency
• Market share shifting from expected to continue
imports to local manufacturers
due to weaker currency

• Infrastructure projects on
account of FIFA World Cup

11
 Industry  Business highlights
Highlights
 Recent Development
Industry Highlights
South Africa
 Financial highlights
 Shareholding information
Apollo
 Looking ahead
Snapshot

12
Business Highlights

22%
60

R –
50
CAG 50
47

43

40
Rs. Bn

30
26

22

20

10

-
FY 05 FY 06 FY 07 FY 08 FY 09

Consolidated Top Line

13
 Business Highlights

Exports, 11%

OE, 14%

Replacement, 74%

Farm, 7% Others, 2%

PCR, 16%

Light Truck, 11%

Truck, 64%

Revenue Segmentation
14
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
15
Recent Development

Announced acquisition of Vredestein Banden

B.V., a €300+ Mn Company with
manufacturing base in Netherlands, and
operations all over Europe

16
 Recent Development
• Manufacturing Plant at Enschede, Netherlands (2 hours
from Amsterdam), close to Dutch/German border

• Capacity : 5.5 Mn units p.a

• Manpower : 1,500+

Manufacturing Facility
17
Recent Development
• 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

Rationale
18
Financial Highlights
Revenue Bridge (Consolidated)

Price Mix Volumes

(+13.0%) (-4.4%) Others
-2,072 (-2.3%)
6,088 -1,088

+6.2%

49,841

46,912

Consolidated Net Sales : FY 2008/ FY 2009

(Rs. Mn)
FY 2008 FY 2009

Sales growth led by price improvement

19
Financial Highlights
Net Sales EBIDTA Margin
51

50
50 14.0% 13.1%
50
12.0%
49

49 10.0%
8.8%
Rs. Bn

48
8.0%
48

%
47 6.0%
47

47 %
6.2
4.0%
46
2.0%
46

45 0.0%

Net Profit Margin EPS

7.0%
6.0 5.7

6.0% 5.7%
5.0

5.0%
4.0
4.0%
%

Rs .
3.0 2.8
3.0% 2.8%

2.0
2.0%

1.0% 1.0

0.0%
0.0

FY 2008
FY 2009
20
 Financial Highlights

Balance Sheet Size Net Debt

30.0 6.0
5.3
24.6
25.0 5.0

20.0
20.0 4.0 3.6

Rs. Bn
Rs. Bn

15.0 3.0

10.0 2.0

5.0 1.0

0.0 0.0

FY 2008
FY 2009
21
 Financial Highlights
0.8
Net Debt to Equity 1.6 Net Debt to EBIDTA
0.7 1.4
1.4
0.7

0.6 1.2
1.0
0.5 0.5 1.0
0.8

Ratio
Ratio

0.4 0.3 0.8

0.3 0.6

0.2 0.4

0.1 0.2

0.0 0.0

30.0% ROCE ROE

30.0%
24.6%
25.0% 25.5%
25.0%

20.0%
17.1% 20.0%
Ratio

15.0% 13.9% 14.9%

Ratio
15.0%
10.9%
10.0% 10.0%

5.0% 5.0%

0.0% 0.0%

FY 2007
FY 2008
FY 2009
22
Shareholding Information

FIIs/ NRIs/ Foreign Bodies

Corporate, 15%

Govt of Kerala & Others, 2%

Promoters, 39%

Public, 26%

FIs/ Banks/ Mutual Funds, 18%

23
 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.

24
Thank You