India: APL Apollo records highest ever sales in Q4FY23

India's leading structural steel pipe manufacturer, APL Apollo Tubes Limited, has announced its financial results for the quarter ending 31 March, 2023. The company announced its highest quarterly sales volume and EBIDTA during the investors' call on 12 May, which SteelMint had the occasion to attend.

Sales volumes rise: The company's sales were recorded at 650,000 tonnes (t) in the fourth quarter of FY23, up 18% against the same period last year. Sales rose by 7% q-o-q against 605,000 t in Q3. Moreover, sales in FY23 (April 2022- March 2023) rose by 30% to 2,280,000 t y-o-y.

The company reported its highest ever quarterly sales volume. "FY'23 was a roller coaster ride, with steel prices falling from INR 65,000/t to INR 55,000/t and finally settling between INR 55,000/t and INR 60,000/t. This decline was seen after the global collapse of commodity prices in May 2022 which impacted the building materials industry and also APL apollo tubes as our distributors reduced their inventories as profit margins came under pressure. However, we are pleased to report that we ended FY23 in quite good shape as our sales volume recovered strongly with 30% growth after two prolonged lows due to Covid disruptions in FY21 and FY22," said Anubhav Gupta, Chief Strategy Officer at APL Apollo.

Super value-added products: Value-added products contributed 56% of total sales in FY23. Moreover, the ramp up from the greenfield plant in Raipur will likely support sales volumes and EBITDA growth in the coming quarters.

EBITDA rises in Q4FY23: EBITDA per tonne inched up by 3% y-o-y to INR 4,970/t in Q4FY23. It rose by 10% compared to INR 4,510/t in the preceding quarter. However, in FY23, EBITDA decreased by 17% to INR 4481/t y-o-y because of channel destocking which led to some sales push strategy.

Strong operating cash flow: Operating cash flow remains very strong at around INR 9.7 billion of OCF in FY23, which is almost 95% of the overall FY23 EBITDA. So, the cash flow generation remains strong and because of the strong cash flow generation, the capex in FY23 was INR 8.4 billion, out of which 80% was of Raipur. However, net debt in FY23 increased by INR 0.4 billion to INR 2.4 billion against INR 2 billion last year.

Capacity increase: The company's capacity increased from 2.6 mnt to 3.6 mnt following the commissioning of the new Raipur plant, which is the biggest ever plant of the company. Out of total capacity, the housing segment accounted for 55%, the commercial segment 25% and the infrastructure segment 20%.

Shankara project: The volume contribution from Shankara increased by 180% in FY23 compared to FY22. This has led to a very close relationship between the two organisations, with the company looking aggressively at gaining market share in south India.

Raipur plant update: Ramping up of the Raipur plant started from the first quarter of FY23 and by the fourth quarter reached a volume of 73,000 t, which is 30% utilisation rate. The company's return on capital (ROC) was 29% while return on equity (ROE) was 24% - slightly lower y-o-y because of heavy investment in the Raipur plant. Moreover, the company is enjoying good profitability from the plant.

Vision:

• Exports in FY23 stood at 60,000 t and the company is aiming to take it to around 100,000 t during FY24.
  
  
• Plans are afoot to increase sales to around 3.8-4 mnt by FY25.
  
  
• 300,000 t capacity plant in Dubai will start by Q4 of FY24.
  
  
• Capacity expansion in Dubai, east India and new incremental capacity in Raipur will help the company to reach around 5 mnt by FY25.
  
  

Innovation: APL Apollo is the first company to innovate readymade steel chaukhat, fence, plank and hand rails to replace conventional wood application in building construction. Also, it is the first company to innovate narrow and thicker colour-coated galvanised sheets which will save more trees.