Earnings Review
APL Apollo Tubes Jul-Sept consol PAT down on inventory loss
This story was originally published at 18:31 IST on 29 October 2024
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--APL Apollo Jul-Sept consol net profit INR 538.1 mln
--Analysts saw APL Apollo Jul-Sept consol net profit INR 1.07 bln
--APL Apollo Jul-Sept consol net profit INR 538.1 mln vs INR 2.03 bln
--APL Apollo Jul-Sept consol revenue INR 47.74 bln vs INR 46.30 bln
--APL Apollo Apr-Sept consol net profit INR 2.47 bln vs INR 3.96 bln
--APL Apollo Apr-Sept consol revenue INR 97.48 bln vs INR 91.75 bln
--APL Apollo Jul-Sept EBITDA INR 1.4 bln, down 58% on year
--APL Apollo Jul-Sept consol EBITDA/tn INR 1,821, down 62% on year
--APL Apollo Jul-Sept consol sales volume 758,000 tn, up 12% on year
By Aman Aryan
MUMBAI – Structural steel tubes and pipes manufacturer APL Apollo Tubes Ltd. Tuesday posted the highest on-year fall in the last 17 quarters in its net profit for the September quarter, missing the Street's estimates by a wide margin. The company's consolidated net profit for the September quarter fell 73.5% on year and 72% sequentially due to high inventory losses and increased other expenses.
The company's consolidated net profit of INR 538.1 million in Jul-Sept was the second lowest in the last 21 quarters. Analysts had expected the company to report a consolidated net profit of INR 1.07 billion. Despite reporting an 11% on-year growth in its sales volume, APL Apollo's consolidated revenue for the latest quarter rose only 3.1% on year, the second-lowest growth in the last 17 quarters. Consolidated revenue for Jul-Sept was INR 47.74 billion, up from INR 46.30 billion a year ago. Analysts had expected revenues of INR 49.88 billion. Sequentially, APL Apollo's consolidated revenue was down 4% in the quarter.
The company said it recorded the highest ever quarterly sales volume of 758,267 tonnes in Jul-Sept, which primarily drove the company's revenue. The revenue gains were not reflected in the company's earnings in the latest quarter as they were offset by the lower earnings before interest, tax, depreciation, and amortisation per tonne for the latest quarter due to volatile steel prices.
The company's inventory declined by INR 618.4 million for the September quarter against a gain of INR 690 million a year ago. Analysts had earlier expected the company to report inventory losses due to de-stocking caused by heavy discounting and volatile steel prices. They said the company's volume would have risen at the cost of profitability in the latest quarter. The company Tuesday said its profitability was severely impacted by volatile steel prices.
For Jul-Sept, the company's other expenses rose to INR 3.07 billion from INR 2.64 billion a year ago. The company's total tax expense for the latest quarter fell to INR 157.8 million from INR 737.9 million due to a fall in its current tax expense.
The company's EBITDA for the September quarter fell 58% on year to INR 1.4 billion, while its EBITDA per tonne fell 62% to INR 1,821. The EBITDA per tonne for the latest quarter was the lowest in the last five financial years. The company expects INR 5,040 per tonne of EBITDA by 2026-27 (Apr-Mar). Besides the operating profit, the company's cash profit has also fallen 59% on year to about INR 1 billion in the latest quarter. For Apr-Sept, the company's capital expenditure was 2.6 times its cash flow. The company said it had a negative cash flow of INR 3.43 billion in the first half of the current financial year.
While the company's net debt rose to around INR 3 billion as of Sept. 30 compared to INR 2.2 billion a year ago, its interest coverage ratio has fallen to 2.5 in Apr-Sept from 9.6 in FY24.
Although APL Apollo's value added sales mix for the latest quarter was flat on year at 55%, it contracted about 500 basis points sequentially. The Apollo structural product portfolio volume rose 12.3% on year in the latest quarter and Apollo Z product portfolio volume rose 16.2%, the company said. However, the Apollo Galv product portfolio volume fell 9% on year.
While lower steel prices affected the company's earnings for the latest quarter, these also helped it to gain market share from low-grade sponge iron-made steel pipe makers, the company said. APL Apollo's structural steel tube market share in India will increase to 8.3% in 2030 from 6.5% in FY24, it said. The company's addressable market for hot rolled coil-based steel tubes will likely grow faster than the scrap steel-based tube market, APL Apollo said.
The company said it plans to add 610,000 tonnes of capacity through three greenfield plants and 90,000 tonnes through brownfield expansions. "We remain prudent with our working capital management, which remains best in the construction material sector," Sanjay Gupta, the company's chairman said. This will take the company's annual capacity to 5 million tonnes by the end of FY26 from current 4.3 million tonnes.
For Apr-Sept, the company's consolidated net profit fell to INR 2.47 billion from INR 3.96 billion in the year-ago period. However, the company's consolidated revenue rose to INR 97.48 billion in the first half of the current financial year from INR 91.75 billion a year ago.
On Tuesday, shares of the company closed at INR 1,510.40, up 4.2%, on the National Stock Exchange after recovering 9.7% from the day's low. End
Edited by Tanima Banerjee
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