Conference Call with APL Apollo Tubes Management and Analysts on Q4FY20 and Q1FY21 Earnings Performance and Outlook. Listen to the full earnings transcript.
Highlights from Management
FY20 Performance
22% increase in sales volume in FY20. FY20 was impacted by challenging macros, slowdown in construction activities, weak market liquidity and final knock with Covid-19. APL Apollo consolidated its leadership position in structural steel tubes with market share improvement to 40% vs 36% in FY19
The operations and manufacturing activities at all offices and plants had been temporarily closed till the government announced relaxations. The company resumed operations at its plants gradually from 22 April 2020 onwards from Raipur. The company today announced its sales volume performance for the quarter ending June 30, 2020.
Company further improved working capital cycle which generated strong operating cash flows of Rs5.1bn. It helped fund capex and two acquisitions worth Rs4.3bn. Net debt reduction by Rs266m to Rs7.8bn.
APL kick started mass branding exercise with TV commercials, Outdoor media and other below-theline activities. Benefits visible in form of market share gains in FY20.
We expect momentum to continue once sales volume reach normalized levels after COVID-19 disruption.
Q4FY20 Performance
Q4 commenced on a healthy note with Jan-Feb witnessing revival in construction activity. The company was forecasting double digit sales growth for the quarter before the lockdown. Covid-19 disrupted supply chain and impacted the demand after 15th March; then there was a complete lockdown post 23rd March.
EBITDA/Ton declined 5% yoy to Rs3,200 due to volume loss in March owing to COVID-19 impact .
Interest cost declined 17% yoy backed by debt reduction. Depreciation costs increased 48% yoy due to capacity expansion. Net profit declined 8% yoy to Rs 568 mn.
Debt/Equity ratio improved to 0.6x from 0.8x in FY19. Debt to EBITDA improved to 1.6x from 2x in FY19, and Interest coverage ratio improved to 3.8x from 3x in FY19.
Q1FY21 Update
APL Apollo Tubes registered sales volume of 238,311 tons in Q1FY21 (61% of Q1FY20 volume and 59% of Q4FY20 volume). As a one-time special disclosure during COVID-19 pandemic, the company has also announced net debt of Rs. 3,700 crore provisionally for the June quarter of the Financial Year FY21.
Currently debtors are spread across 800+ distributors. We are evaluating channel financing options to further minimize debtors and delayed capex spends.
Building Material companies guiding for 25-30% volume decline, while Structural steel Tubes is set to outperform other Building materials.