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APL Apollo Tubes
BSE: 533758|NSE: APLAPOLLO|ISIN: INE702C01019|SECTOR: Steel - Tubes/Pipes
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« Mar 12
Chairman's Speech (APL Apollo Tubes) Year : Mar '13
Dear Shareholders
 
 We are pleased to achieve yet another year of superlative growth, which
 outperformed our sectoral growth in 2012-13 and also established our
 industry leadership. This performance was achieved through game-
 changing initiatives which pioneered modernisation in the sector and
 positioned our Company as a fast- moving trail blazer.
 
 The tubes industry went through considerable under-investment in the
 decade following liberalisation. Even as global infrastructure growth
 standards evolved to the modern and cutting-edge, Indian standards
 lagged on account of the size of infrastructure spend required on the
 one hand and the sophistication of material needed on the other.
 
 The change began to transpire about a decade ago when India began to
 invest considerably larger amounts in infrastructure; the global scale
 of a number of these investments were corresponded by cutting-edge
 technologies. In turn, specialised consultants recommended new-age
 designs and materials. This opened out a new market where the pipes
 needed to be more sophisticated around newer applications. The result
 was that an entirely new market began to emerge.
 
 First moving
 
 At that point, two things could have happened. The conventional players
 could have retained their longstanding focus or widened their product
 focus. APL Apollo was one of the first players to recognise the
 vastness of the emerging opportunity and the potential of hitherto
 overlooked geographies - South India, tier-ll and rural markets. The
 Company moved with speed to invest in new production lines, introduce
 new products, market products to consumers, position products around
 superior attributes, demonstrate enhanced consumer value, widen the
 product range to address more sectors and extend its national footprint
 through warehouse cum branches.
 
 Result
 
 We are happy to state that these initiatives did not just prove to be
 share-enhancing; they proved to be market-widening and game-changing as
 well.
 
 - In a commodity business, we carved out a distinctive brand
 identity.
 
 - In a business defined by fragmented capacities, we created
 industry- transforming scale.
 
 - In a business marked by conventional knowhow, we invested in
 cutting-edge technologies.
 
 - In a business represented by a limited portfolio, we introduced
 more products.
 
 - In a business where a majority of the sales were B2B, we provided a
 retail alternative.
 
 This is the result of our game- changing approach: APL Apollo Tubes
 emerged as India''s largest ERW steel tubes manufacturer with capacity
 of 6,00,000 TPA, possessing the widest product mix and pan-India
 distribution network that —ten-folded our sales and profits in just
 seven years.
 
 in FY13, a year of decadal-low economic growth, APL Apollo Tubes
 established leadership and a superior performance:
 
 - Net sales grew 44% YoY
 
 - EBITDA grew 40% YoY
 
 - PAT grew 14% YoY
 
 - Opened six warehouse cum branches in Indore, Raipur, Hisar, Kala
 Amb, Surat and Delhi taking the total to 20
 
 - Added prestigious clients like Bangalore Metro, Goa Airport, Nashik
 Airport and Firepro
 
 - Maintained relationship with India''s leading companies across
 diversified industries like BHEL, L&T, Adani, Ashok Leyland and Jain
 Irrigation
 
 - Expanded capacity by 100,000 TPA
 
 - Operated plants at a high utilisation of 85%
 
 - Introduced new product varieties
 
 Optimism
 
 There are a number of reasons why the outlook appears optimistic for
 our sector and company.
 
 Even as infrastructure growth has been reasonable over the last few
 years, there has been a wider-than-usual offtake of tubes, indicating
 that the market for this is still nascent and emerging.
 
 Even as the market has often been classified as commodity, there is a
 growing demand for value-added products.
 
 The result is that India''s steel tubes market is growing faster than
 the global average, indicating that the country has possibly touched an
 inflection point following which steel tubes consumption will only be
 quicker.
 
 There is a growing body of evidence to support this conviction. There
 is increasing governmental emphasis to connect rural Indian fringes;
 India''s mass rapid transport (metro) network is driving tubes offtake;
 the growth of India''s telecom sector is expected to rebound; the
 country''s wind energy sector is reporting its quickest growth in years;
 US, Brazil, Canada and some European countries imposed anti-dumping
 duties on Chinese tubes and pipes, widening the export opportunity for
 Indian manufactures.
 
 Our response
 
 At APL Apollo Tubes, we expect to capitalise on this industry reality
 through the manufacture of products addressing diverse sectors,
 de-risking our growth from a downturn in one or more of our consuming
 industries. We are focussed on widening our national reach, extending
 the distribution network, strengthening customer relationships through
 collaborative product development and working with a long-term business
 outlook.
 
 The Company will support these initiatives through the creation of a 1
 MTPA capacity by 2015, which will reinforce our position as India''s
 largest steel tubes manufacturer.
 
 We expect that a combination of these initiatives will translate into
 projected revenues of US$ 1 billion and enhanced value for all those
 who own shares in our Company.
 
 Regards,
 
 Sanjay Gupta, Chairman
Source : Dion Global Solutions Limited
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