Detailed Narrative
Q4 FY25 Consolidated Performance and Challenges
Apollo Tyres reported a consolidated topline growth of 3% year-on-year for Q4 FY25, achieving an EBITDA margin of 13%. This marks a decline from 16.4% in the same quarter last year, primarily due to steep raw material cost pressures and the impact of lower revenue growth on operating leverage. Management acknowledged that FY25 was a 'very, very challenging year' and that the company underperformed its expectations and peers in both India and Europe.
India Operations: Mixed Performance with Focus on Growth
India operations delivered a revenue of INR 45.8 billion in Q4 FY25, representing an 8.4% year-on-year growth, with an EBITDA margin of 11.2%. While the domestic replacement segment, particularly TBR, showed good growth, this was partially negated by a flattish performance in the OE segment and a decline in exports. The company is now intensifying its focus on increasing market shares in both the OEM and export segments to drive future growth.
European Operations: Capacity Constraints and Restructuring Impact
European operations recorded a 4% year-on-year revenue decline, reaching EUR 176 million, with an EBITDA margin of 14.3% in Q4 FY25. The underperformance was largely attributed to capacity constraints, which led to the strategic decision to sacrifice volumes in the non-UHP category to prioritize UHP/UUHP tyres. The company also announced the intended closure of its Enschede plant in 2026, resulting in an exceptional impairment charge of EUR 14 million on fixed assets in the quarter.
Capital Expenditure and Capacity Expansion Plans
The Capex plan for FY26 has been revised to INR 1,500 crores, down from the previously communicated INR 2,000 crores, with funds split equally between growth and normal Capex. This includes a 4,000 tyres per day PCR expansion in both Hungary and the AP plant. The Hungary capacity is expected to become available by the end of the current fiscal year. The reduction in Capex reflects a judicious approach given market volatility🌐 and uncertainty.
Raw Material and Margin Outlook
Raw material costs were a significant factor impacting margins in Q4 FY25. For Q1 FY26, the company anticipates a 'flattish raw material trend vis-a-vis Q4'. Current commodity prices were noted as natural rubber at INR 200+ per kg, synthetic rubber at INR 190 per kg, carbon black at INR 115 per kg, and steel cord at INR 160+ per kg, with a blended average of INR 170 per kg. The company continues to focus on sales mix improvement, with premium passenger car business now exceeding mid-40s.
Organizational Stability and Future Outlook
Management acknowledged that an internal reorganization earlier in the year contributed to the underperformance but stated that the organization is now stable. They expressed strong conviction in the team's capabilities and expect 'much, much better performance' in Q1 FY26. The company aims to regain its position as a leader in India in FY26, driven by market growth, new product launches, and continued focus on cost optimization and sustainable growth across key geographies.