Apollo SA goes for business rescue

Apollo Tyres South Africa, formerly Dunlop Tyres South Africa but now part of the listed Apollo Tyres Group of India, has applied to be placed in voluntary business rescue proceedings.

A written resolution passed by Apollo SA’s board of directors last week said the company was financially distressed and it appeared reasonably unlikely that it would be able to pay all of its debts as they became due and payable within the next six months.

However, the resolution said there appeared to be a reasonable prospect of developing and implementing a plan for the restructuring of the operations of the company to achieve a better return for its creditors and shareholders than would result from an immediate liquidation of the company.

Manish Bhatia, a director of Apollo SA, said in an affidavit in support of Zaheer Cassim being appointed the company’s business rescue practitioner that the difficult trading conditions being experienced by the tyre maker were the consequence of several factors.

Bhatia said these included the sudden and unexpected stoppage of all orders for products from Sumitomo Rubber South Africa and the company’s inability to effectively penetrate the local market due to the lack of a reputable brand, required tooling and a lack of infrastructure for sale and support.

The continuous labour unrest and related issues and the company’s inability to produce its products at a cost that provided sufficient margins for the business and its customers were also cited as reasons for the firms’s financial distress.

He said Apollo SA’s creditors were owed about R164 million and debtors owed the company about R136m. It had fixed assets valued at about R242m and inventory worth R256m.

“There appears to be a reasonable prospect of developing and implementing a plan for the restructuring of the operations of the company as commencing business rescue proceedings will result in a temporary moratorium on the rights of claimants against the company and in respect of property in its possession,” Bhatia said.

He said there were no active liquidation proceedings that had been initiated by or against the company.

The Apollo Tyres Group, the seventh-largest tyre company valued at $6.6 billion (R73.5bn), bought Dunlop Tyres SA in 2006 in a deal then worth R382m from Ethos Private Equity and a consortium comprising the company’s management.

Since then, Apollo Tyres Group has invested more than R600m in its operations in South Africa, the bulk of it in new equipment and technology at its Ladysmith and Durban manufacturing plants.

The local tyre industry has been knocked by cheap tyre imports, largely from China.

Apollo SA applied to the International Trade Administration Commission (Itac) in November last year for an amendment of the duty structure for certain types of tyres and the imposition of formula-based customs duties on car, bus and truck tyres instead of the current ad valorem duties.

Among the reasons provided by Apollo SA for its application was the massive influx of low-priced and under-invoiced imported tyres, mainly from China.

Apollo SA requested the introduction of a reference price into the duty structure to counter under-invoicing.

This followed an Itac decision to not impose anti-dumping duties on tyres imported from China and to terminate its investigation into these imports. The Supreme Court of Appeal rejected an appeal by the SA Tyre Manufacturing Conference for a review of the Itac decision.