Apollo Tyres has determined to chop again its capex by about Rs 300 crore to Rs 2,400 crore in 2019-20 and by an identical quantity in FY21, following the slowdown in auto sector. The proposed capex primarily will likely be at firm’s upcoming unit in Andhra Pradesh and at its Hungary facility.
During the current analyst name, firm’s administration mentioned, “The company had started the year with an estimate of Rs 2,700 crore capex, which has now been scaled back to Rs 2,400 crore. Over the last nine months, the company incurred a capex of about Rs 2,000 crore”.
For the following yr, the quantity needs to be within the vary of Rs 1,400-1,500 crore from Rs 1,700-1,800 crore earlier. The choice is in keeping with different tyre makers’ plans to chop down capex because of the slowdown within the auto sector.
“All the competitors, including us, were surprised at the drop in OEMs and particularly the extent of drop in OE business. Because of that, from the announced plans, the capexes have been slowed down by everybody like we have,” Gaurav Kumar, chief monetary officer of Apollo Tyres instructed analysts.
“Based on the market information that we get, all the players have slowed down their capital expenditure. So is there specifically some capacity coming up, which will alter the demand‐supply economics in near term? (The answer is) No,” he added.
Speaking in regards to the Andhra Pradesh facility, he mentioned, that the plant ramp up could rely on how the demand state of affairs pans out. The ramping up is scheduled to occur over two years, and the complete capability will likely be accessible in Fiscal 2023. When it reaches 100 per cent utilisation, it could genrate over Rs 4,000 crore in income.
The plant will begin making tyres by the top of this yr and then its capability will likely be expanded to 15,000 automotive tyres and 3,000 truck radials over a two-year time-frame, that’s by FY22-end.
The firm expects the fourth quarter uncooked materials costs to be decrease than the December quarter. The main rubber manufacturing nations could have a look at offloading their output, because the Chinese market has been weak within the current previous, mentioned analysts.
While the coronavirus outbreak could influence the provision of Chinese tyres to Europe and supply a widow of alternative Indian producers together with Apollo Tyres, it may additionally disrupyt the provision chain contemplating China’s presence throughout completely different geographies is critical. The agency expects to start out realising all the advantages together with a fully-scaled up plant in Hungary, Europe by FY22.