Apollo Tyres to cut capex by Rs 400 crore this fiscal to preserve cash flow
NEW DELHI: Homegrown tyre-maker Apollo Tyres has decided to cut its capital expenditure (capex) by Rs 400 crore this fiscal owing to the coronavirus outbreak and its impact on the business.
“Given the overall demand situation, we have cut back on capex to the tune of another Rs 400 crore in 2020-21 to make sure that we are not stressed from a cash flow or a liquidity perspective,” Apollo Tyres Chief Financial Officer Gaurav Kumar said in an analyst call. The company has also taken a cut in the capex investment across its European operations
The company had earlier earmarked a capex of around Rs 1,400-1,500 crore for its domestic operations for the current financial year.
Now, that figure would be about somewhere between Rs 1,000 and Rs 1,100 crore.
On the outlook for the current financial year, Kumar said, “In the current times, very difficult to give you an outlook for the full year.
We have been just in a couple of weeks since partial lifting of the lock down and we have been surprised positively by the extent of recovery in the replacement market.”
It, however,, expects to see sales decline in FY21 as compared to FY20, because the original equipment business is still looking fairly weak and there is no promising outlook as well.
All its plants have begun operations and are at lower levels of utilisation as expected, but they are gradually ramping up.
“While April was hardly any sales..., May is looking promising. We expect to be about 50 per cent of normal. And if the business climate, continue to move toward more and more normalcy, then June should be even better,” he said.
Sales decline likely
The company said that it expects to see a decline in sales during FY21, as compared to FY20, because the original equipment business is still fairly weak.