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Informist, Tuesday, Oct. 29, 2024

--APL Apollo: Volume trends in Oct-Mar should remain strong 

--CONTEXT: Comments by APL Apollo Tubes management at post-earnings call 

--APL Apollo: Maintain sales volume guidance of 4 mln tn over next 2-3 years 

--APL Apollo: Steel price correction in Jul-Sept led to inventory losses 

--APL Apollo: Gave additional discounts in Jul-Sept to boost sentiment 

--APL Apollo: Steel prices crashed but Sept qtr sales volume increased QoQ 

--APL Apollo: Saw inventory loss of INR 1.5 bln in September quarter

--APL Apollo: Will continue with Bengaluru plant, won't move it to Ahmedabad 

--APL Apollo: Going forward, expect 10% QoQ revenue growth 

--APL Apollo: Will incur capex of INR 3 bln-INR 3.5 bln over next 6-7 months 

--APL Apollo: Govt projects may reach pre-Lok Sabha poll levels in Jan-Mar 

By Apratim Sarkar and Anand JC

MUMBAI – APL Apollo Tubes Ltd. expects to achieve 10% sequential growth in revenue in the coming quarters, the company's management said in a post-earnings conference call Tuesday. The company said a correction in steel prices in the September quarter affected its earnings, and its operating profit spreads collapsed to an all-time low.

The correction in steel prices in Jul-Sept led to an inventory loss of INR 1.5 billion, the company said. However, the company expects inflation in domestic steel prices to be over. The gap between APL Apollo Tubes' products and low-grade sponge iron-made steel pipes has narrowed considerably, it said.

The management said it expects the Dubai plant to produce 16,000 tonnes at the end of October. It said the company has a market of 5 million tonnes in primary steel and 6 million tonnes in secondary steel. The management expects to surpass the guidance of 3.2 million tonnes by FY26. The management is hopeful of achieving volume guidance of 4 million tonnes over the next two to three years.

APL Apollo Tubes provided an additional discount of INR 500 per tonne to its customers to push sales amid a correction in steel prices. The company opted for discounts to reverse dampened sentiment of distributors and channel partners. However, the company rolled back the discount in October. 

The management of APL Apollo Tubes said it is not looking to shift its plant to Ahmedabad from Bengaluru as the company feels the need for a plant in the southern market of the country. The company also said it didn't want to take away the market share from its Raipur plant.

The company will incur capital expenditure of INR 3.0 billion to INR 3.5 billion over the next six to seven months from its general cash flows. The company's rated capacity in the last quarter was 1.1 million tonnes; in the latest quarter it reached 1.2 million tonnes, the management said. The company's debt saw a slight build up as its capacity increased to 4.3 million tonnes in the September quarter.

Government infrastructure projects, which account for 25% of the company's revenue, saw a slowdown in the last few months due to the Lok Sabha elections, the delayed Union Budget, and the monsoon. Orders from the government are not back to the pre-election level yet, the company said, as it witnessed a slowdown in construction in North India. The company expects revenue from government infrastructure projects to be back to pre-election levels in Jan-Mar.

The company expects the overall volume trend in Oct-Mar to remain strong as it estimates to achieve 3.2 million tonnes sales target for the current financial year. The management is optimistic about achieving the target as its channel partners are sitting on low inventory levels. On the National Stock Exchange, shares of the company closed 4.2% higher at INR 1,510.40.  End

Edited by Ashish Shirke

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