What’s the pattern that you’re witnessing within the auto sector?
Now we’re seeing an uplift in each truck and automotive given the economic system increase that’s taking place in India. The GDP is predicted to be round 6%. So we’re seeing freight motion taking place. Particularly in truck TBR for us has gone up 18% 12 months on 12 months whereas passenger automotive has gone up 15% so substitute is again. Additionally, within the OEM phase, we’re seeing, truck industrial phase coming again up, automobiles are additionally coming again up, so a fairly optimistic pattern in India at present.
Earlier you had identified about sluggishness in key export markets, particularly Europe. Have issues bottomed out on the subject of different export geographies, particularly Europe?
Properly, no. Europe remains to be going by means of an enormous recession. Inflation has began coming down, so that may be a good signal. Final quarter or quarter three, the passenger automotive phase was down 14% however Apollo in Europe was down solely 5%. So we did acquire market share. Our excessive focus is in bettering our product combine in Europe, so going for the extremely excessive efficiency types, which right this moment institutes practically 45% of our whole pie of the automotive phase.
I’m once more very optimistic about Europe, provided that we’re a really area of interest participant. We’re focusing on markets the place we’re lower than 2% market share; France, Italy, Spain and UK are the 4 international locations that there’s clear focus so far as Apollo in Europe is worried.
Any timeline that you’re working with when can we see restoration in Europe? Are subsequent couple of quarters going to be comfortable?
I feel the demand goes to be sluggish for the subsequent two quarters so first half goes to be powerful. However like I mentioned, we’re a distinct segment participant, we’re a small participant in Europe, so we get damage final. Our complete intention is to see how we are able to get into varied new distributions. Russia, Ukraine warfare has additionally given us a possibility as a result of there have been near 10 million passenger automotive tyres coming in from Russia into Central Europe. In order that has been banned from coming in. Since July of 2023 so that provides us a brand new alternative to enter that new distribution community.
You might be speaking about how there are particular key areas the place you’re looking at making your foray however given the truth you make funding into new geographies, would it not imply that margins will likely be beneath stress? What is the outlook?
No, I don’t suppose that’s going to hit the margins. On the optimistic aspect, uncooked materials has come down 6% quarter on quarter so each pure rubber and all our different uncooked supplies have softened out, so EBITDA margins are going to be more healthy.
We reported round 14% EBITDA margin in quarter three. I see an upside coming in quarter 4 additionally and going ahead, I consider the uncooked materials pattern goes to stay at this degree given our pricing technique goes to be sustainable. I feel our EBITDA margins are going to go up from right here.
You probably did level out that there was a little bit of discount on the subject of the uncooked materials pricing. So are you passing it on to customers when it comes to worth cuts, or how is the pricing depth in the meanwhile within the business?
Properly, I feel we’re sustaining a powerful self-discipline so far as pricing is worried in India. In Europe, we’re seeing slight drop by competitors in costs however we’re but to see it is vitally quickly.
Give us a bit extra color when it comes to how the capability utilisation is at this level of time. Do you’ve plans to extend and increase your capacities? Any capex plan lined up for the subsequent 2 to three years?
At this time we’re actually centered on seeing how we are able to enhance our ROCE and our money flows. So we’re going completely capex gentle for the subsequent 2 to three years. We have now sufficient capability to take care of new markets to take care of new distributions. Our capability in Europe was operating at round 90% utilization; in India, it’s operating round 80% utilization.
We have now sufficient capability. On high of that, what we are attempting to do is use digitalization. So utilizing AI and machine studying, getting quite a lot of information from the equipments to try to see how we are able to enhance our productiveness.
Particularly, I gives you an instance of our plant in Hungary. We by means of AI and machine studying and thru different engineering processes and manufacturing processes have elevated our productiveness to 30% extra.
So that is the place the funding goes into digitalization and to see how we are able to enhance our productiveness in all our crops.
So actually, there isn’t any plan for any expansions, solely taking a look at debottlenecking, taking a look at utilizing these instruments to try to see how we are able to enhance manufacturing in all our classes of merchandise.
Apollo Tyres, in fact, other than digitalization, has additionally been the entrance runner on the subject of adoption of sustainability. I used to be simply studying concerning the tyre which you make with 75% of recycled materials. Give us a little bit of sense of the place you might be in your sustainability timeline and what is the goal?
So our imaginative and prescient may be very clear so far as sustainability is worried, we’re taking a look at turning into carbon impartial by 2050.
In passenger automotive we’ve got come out with a 75% inexperienced tyre. In our agri we’ve got come out with 100% sustainable tyre. So there are quite a lot of efforts across the firm taking a look at how we are able to go on the sustainability path.
So far as crops are involved, we’re taking a look at water consumption, we’re taking a look at carbon emissions, so it’s important to see that by means of AI and machine studying additionally our crops turn into rather more environment friendly thereby utilizing much less vitality and due to this fact giving out much less carbon emissions.
So far as merchandise are involved, we’re taking a look at clearly low rolling resistance, which then contributes to the inexperienced vitality within the automotive sector. So there’s a lot occurring. There’s quite a lot of give attention to sustainability throughout the globe for Apollo. And I’m pleased to say we’re entering into the proper path so far as sustainable procurement is worried.
A fast phrase as to what do you suppose would be the subsequent huge pattern to be careful for within the business and the way Apollo Tyres is de facto gearing as much as faucet that chance.
Properly, I feel mobility goes by means of a significant shift and Apollo is getting itself as much as take care of that new change. And primarily it’s going to be pushed by means of EV, electrical autos. Europe has already been in electrical autos for a really very long time, at the very least for the previous 2 to three years, India is now coming into electrical autos. So so far as Apollo is worried, we’re all equipped. We have now already come out with merchandise for tackling electrical autos. We have now already launched in Europe and we’ve got launched in India. So we’re gearing up ourselves to see mobility and the way mobility goes to vary as we go alongside.