Apollo Tyres to raise prices again in June

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Apollo Tyres Ltd, India's second largest tyre maker, will increase prices by 3.5 percent from June 1, the second time since April, to offset a surge in costs, Chief Financial Officer Sunam Sarkar said on Friday."We did take a 3.5 percent increase last month. And we are taking another increase from June. We have no option given the kind of price rise that is happening," he told Reuters.Natural rubber makes up over 40 percent of the cost of a tyre. Prices of the most traded RSS-4 variety has risen over 22 percent to 17,050 rupees per 100 kilograms so far this year.Earlier this week, JK Tyre & Industries, the country's third largest tyre maker, also announced plans to raise prices by 3-4 percent in June.But the increase in product prices could not keep up with the surge in raw material costs, eating into margins of tyre firms."Most definitely there will be margin pressure in the quarter ahead, rubber prices is thrice what it was last year," Sarkar said.However, sales would continue to gain momentum in the resurgent domestic market, he added.Car sales in India posted their strongest April in at least a decade, jumping an annual 39.5 percent, as consumer demand in one of the world's fastest growing markets remained robust.Sarkar also said the firm was seeing healthy volume growth in the European and South African markets. It has units both in South Africa and the Netherlands."For overseas markets, South Africa has come out of a slump, and demand there is looking better. Europe has had two or three very good quarters, because of the severe winter we had good sales of winter tyres," he said.The firm has lined up a capex of around 11 billion rupees for 2010/11 to augment capacity in its facility in Chennai.The unit makes truck and car radial tyres and most of the earmarked capex would be pumped into this facility.The project would be funded through both debt and internal accruals."Chennai would give us almost 20 percent of our current capacity by the end of this year. Currently we are doing about 850 tonnes per day in India. We will add about 20 percent to that," Sarkar said.The firm, on a consolidated basis, reported a net profit of 6.5 billion rupees for the year ended March 31 versus 1.4 billion rupees in the same period last year. Its net sales rose 63 percent to 81.2 billion rupees for the full year."Our long term CAGR (compounded annual growth rate) has been 20 percent over five years. We are likely to maintain that," he said, without giving an outlook for sales or profits.Apollo Tyres shares ended up 7.14 percent at 70.55 rupees in a firm Mumbai market.(Editing by Sunil Nair)

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