APL Apollo Tubes Q1 FY27: Strong Margins Despite Weak Volumes, Company Confident of 20% EBITDA Growth
APL Apollo Tubes delivered a mixed performance in the first quarter of FY27. While sales volumes were below management expectations due to geopolitical disruptions, high steel prices, and slower construction demand, the company successfully protected profitability through disciplined pricing and an improved product mix.
During its Q1 FY27 earnings conference call, the management reiterated confidence in achieving 15-20% volume growth and more than 20% EBITDA growth for the full financial year, supported by new capacity additions, improving demand, and expansion in value-added products.
Q1 FY27 at a Glance
| Particulars | Details |
|---|---|
| Quarter Performance | Mixed quarter with lower volumes but stronger profitability |
| Sales Volume | 745,000 tonnes |
| Gross Profit/Ton | Increased by around ₹1,000 QoQ |
| EBITDA/Ton | Maintained above ₹5,500 despite lower operating leverage |
| Working Capital | Remained below zero days |
| Cash Position | Around ₹1,400 crore |
| FY27 Volume Growth Guidance | 15%–20% |
| FY27 EBITDA Growth Guidance | More than 20% |
Why Did Volumes Decline?
Management highlighted four major reasons behind the weaker-than-expected volumes.
1. UAE Operations Were Hit by Geopolitical Issues
The company’s UAE business was significantly impacted due to geopolitical disruptions.
- Around 25,000 tonnes of quarterly volumes were lost.
- Shipping disruptions delayed inventory movement.
- July marked the beginning of recovery as operations resumed.
2. Weak Demand for SG Premium Products
APL Apollo’s SG Premium brand faced pressure because of the widening price difference between primary and secondary steel.
Customers shifted toward cheaper secondary material, impacting sales volumes.
3. Energy Crisis Reduced Roofing Product Demand
Power shortages and the energy crisis affected demand for:
- Rust-proof pipes
- Roofing products
This resulted in another 25,000–30,000 tonnes of lost volumes.
4. High Steel Prices Slowed Construction Activity
Rapid steel price inflation created uncertainty across the construction sector.
As a result:
- Dealers reduced inventories.
- EPC contractors delayed purchases.
- Real estate developers postponed procurement.
Management noted that nearly every construction material category—including cement, tiles, electrical products, plumbing and cables—experienced similar demand weakness.
Profitability Improved Despite Lower Volumes
Although volumes declined nearly 20% sequentially, APL Apollo managed to improve profitability.
The company achieved this by:
- Maintaining pricing discipline
- Passing on steel price increases
- Leveraging strong brand positioning
Gross profit per tonne improved by approximately ₹1,000, helping EBITDA per tonne remain above ₹5,500 despite lower plant utilisation.
July Already Shows Recovery
Management said business conditions improved noticeably in July.
Key updates include:
| July Business Update | Status |
|---|---|
| Monthly Volume | More than 300,000 tonnes |
| Month-on-Month Growth | Around 20% |
| Pricing Strategy | Selective adjustments to improve volumes |
| Demand Trend | Improving |
The company expects Q2 to outperform Q1 in both volumes and absolute EBITDA.
FY27 Guidance Remains Unchanged
Despite the weak first quarter, management reaffirmed its guidance.
| Guidance | FY27 Target |
|---|---|
| Volume Growth | 15–20% |
| EBITDA Growth | More than 20% |
| EBITDA/Ton | ₹5,000–₹5,500 |
Management emphasized that quarterly fluctuations may continue, but the full-year target remains achievable.
Massive Capacity Expansion Underway
APL Apollo is preparing for its next growth phase with nearly 3 million tonnes of additional capacity over the next few years.
Upcoming Projects
| Plant | Capacity |
|---|---|
| Gorakhpur | 200,000 tonnes |
| Siliguri | 300,000 tonnes |
| Malur | 1 million tonnes |
| New Plant (Maharashtra/North Karnataka) | 500,000 tonnes |
| Debottlenecking Across Plants | 1 million tonnes |
These projects are expected to significantly strengthen production capacity and improve product mix.
Value-Added Products Will Increase Further
Currently, around 65% of APL Apollo’s sales come from value-added products.
Management expects this share to increase to 75–80% as the new plants become operational.
Higher value-added products generally generate:
- Better margins
- Lower exposure to steel price volatility
- Greater pricing power
The Malur facility, in particular, is expected to produce premium products capable of generating EBITDA above ₹8,000 per tonne.
UAE Business Returning to Normal
The UAE operations are showing encouraging signs of recovery.
Management shared the following roadmap:
| Period | Expected Monthly Volume |
|---|---|
| July | 10,000–12,000 tonnes |
| August Target | 16,000–17,000 tonnes |
| September Target | 24,000–25,000 tonnes |
Once logistics normalize completely, management expects both margins and demand to improve further.
Solar and Infrastructure Offer Long-Term Growth
APL Apollo is also positioning itself to benefit from India’s renewable energy expansion.
The company has launched products designed for solar infrastructure and expects the segment to contribute 4–5% of total volumes over the next few years.
Management believes India’s aggressive renewable energy targets will create a significant long-term opportunity.
Focus on Operational Efficiency
Despite ongoing expansion, APL Apollo continues to maintain a strong balance sheet.
Highlights include:
- Negative working capital cycle
- Cash reserves of nearly ₹1,400 crore
- Continued focus on cost efficiency
- Centralized shared services across group companies to reduce administrative expenses
Management’s Long-Term Vision
Management believes FY27 will be a transition year.
As new plants become operational through FY28, the company expects:
- Higher share of premium products
- More stable EBITDA margins
- Reduced impact from steel price volatility
- Stronger volume growth
- Improved return on capital employed (ROCE)
The long-term target is to increase EBITDA per tonne to approximately ₹6,000 while expanding annual production capacity to around 8 million tonnes.