India: APL Apollo continues to focus on value-added products in Q2

APL Apollo Tubes Limited, India's leading branded structural steel tubes manufacturer, continues to concentrate on value-added products mix which grew from 53% to 62% y-o-y in Q2 FY'22 by de-commoditising its product portfolio. In Q2, the company's value-added products accounted for EBITDA of more than INR 4,000/tonne (t) compared to standard products with EBITDA/t of around INR 2,000/t.

Also, with continuous focus on working capital and cost efficiencies, new innovations and other value-additions, Apollo is confident to achieve a double-digit growth in EBITDA/t and emerge stronger in two-three years.

The company recorded sales volume of 427,000 t, owing to delayed recovery post lockdown, and unseasonal rains, the company said in an investor's call to announce its second quarter (Q2) results.

One of its distributors in Dehradun has opened 5,500 sq. ft. store made of steel tubes.

The company is also focusing on a capex increase from the existing 2.6 mn t to 3.2 mn t in FY'23-FY'24 and 4-5 mnt in FY'25. Plus, it is looking at a 1 mn t capacity expansion from its 11th plant in Raipur and the remaining 0.5 mn t from other brownfield expansions. Production at its Raipur plant will commence by Dec'21-Jan'22.

Furthermore, having good enquiries in the pipeline, APL Apollo has a couple of ongoing heavy structural tubes projects using tubular technology directly with EPC contractors:

1. A hospital (2mn sq ft) project is to be completed within 6 months. The structure is to be completed within 50 days.

2.An oxygen plant (0.1mn sq ft) structure is to be completed in 15 days. The company is showing keen interest in promoting its brand by enrolling 50,000 fabricators to build new designs for the household segment in a bid to reach out to more customers.

The Tricoat merger is on track and the process will be completed by the first quarter of the next financial year.

Other highlights

1. Q2 sales volume up 14%:The company registered a 14% increase in its sales volume to 427,000 tonnes (t) in Q2 FY'22 compared to 373,124 t in Q1 FY'22. The economic recovery post second wave of Covid-19 and sporadic lockdowns contributed to the increase in sales volumes. Meanwhile, on an annual basis, sales volumes declined by 11%.

2. Update on net working capital cycle and net debt:The net working capital cycle increased to 10 days in Q2 against 8 days in FY'21. Post- pandemic, the economy has remained resilient from late July which gives good visibility for the rest of FY'22, which is likely to reflect in the upcoming quarters.

3. Net debt down 19%:Net debt at INR 131.3 crore, edged down 19% on solid free cash flow generation as on 30 Sept'21. Meanwhile, Apollo's business continues to generate strong operational cash flows.