Company reports steady sales in May, June on strong rural demand
Leading producer of structural steel tubes and sections with 10 manufacturing units spread across India, APL Apollo Tubes Limited has recently reported a sharp 22% rise in sales volumes in FY20 vis-a-vis FY19 and a 61% jump in net profit despite fluctuating steel prices.
Steady sales
Resuming operations post-lockdown on April 22, initially from its Raipur unit, the ERW pipe major clocked sales figures of 91,849 t in May’20 and 143,321 t in Jun’20 – an astonishing recovery from just 3,141 t in Apr’20.
Total sales for the Apr-Jun’20 quarter stand at 238,311 t which, considering the body blow to manufacturing activities and supply chains dealt by Covid-19 in the last 15 days of FY20, is far from poor: in fact, Q1 FY21 sales are 61% of total sales recorded in Q1 FY20.
Product mix
With total capacity of 2.5 mn t per annum, APL Apollo reported sales of 1.6 mn t in FY20. In the Apr-June’20 quarter, sales of structural steel with infrastructural, commercial and residential applications – mainly rectangular and square hollow sections – stood at 112,00 t.
Sales of galvanized pipes and mild steel black pipes were recorded at 57,000 t and 24,000 t respectively during the quarter.
Sales of home improvement applications – roofings, steel door frames, etc. – were pegged at 32,000 t. Branded as Apollo Tricoat, the home improvement component is a new and critical tool for expansion of sales volumes.
Total sales in Q4 FY20 were 401,000 t out of which hollow sections – used extensively as heavy construction materials for airports, metro stations, bridges and flyovers – constituted the lion’s share at 188,000 t, followed by pre-galvanised pipes at 95,000 t and MS black pipes at 54,000 t.
Rural demand
Attributing the company’s performance to robust sales of structural products in the tier-II and Tier-III cities, Sanjay Gupta, CMD, APL Apollo Tubes Ltd., said at an investor’s call that farm components such as fencing and also rural housing are witnessing steady sales. Sales from tier-II and Tier-III cities have increased from 40% of the company’s overall sales last year to 70% at present. Since easing of lockdown restrictions, inventory in the company’s distribution channel has fallen by 50%, he said.
The roofings and home decor segment usually registers robust sales in South India ahead of the monsoons, thanks to the company’s large distribution network.
With a market share of 40% in the country’s tubes industry (APL Apollo reaches 1.7 mn t of annual production in the 4 mn t Indian market), the ERW pipe major is aspiring to be debt-free.
Structural steel
“There is a strong will among developers, contractors, engineers and architects to reduce prices. Structural steel tubes are a good alternative to conventional construction methodologies like concrete cement, RCC, wood or aluminum. So we are talking to various agencies to convince them that steel can replace high-cost conventional products at cheaper cost,” said Gupta.
Structural steels are used at various stages of construction, right from piling to building a structure as well as home decor.
“After the lockdown when builders and contractors started work, cement and structural steel tubes were the first products they had come to buy and construction is picking up. Larsen & Toubro has reported that operations have resumed at 90% of their sites,” said Gupta, pointing to diversity in product portfolio as the central pillar of APL Apollo’s market dominance.
~ By Nirmalya Deb
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