Shares plunge 12.23% on the Bombay Stock Exchange to close at Rs 143.90.
Crompton Greaves on Wednesday said its second-quarter consolidated net profit plunged 45.3 per cent from a year earlier, triggering a sharp fall in the company’s stock price. The second successive weak quarterly numbers, coupled with muted growth in the power sector and margin pressures, resulted in a 12.23 per cent drop in the stock price. In fact, the stock has shed more than 40 per cent of its value since the first-quarter results in June.
For July-September, Crompton Greaves reported a net profit of Rs 116.66 crore, compared to Rs 213.59 crore in same period last year. The power systems segment, which accounts for majority of the company’s revenue, was the worst performer. Revenue rose 12.8 per cent from Rs 2,400 crore to Rs 2,705.53 crore. Expenses grew 20 per cent.
The company gave no explanation for the fall in profits, but analysts attributed it to increased competition, weakened margins, muted growth in the power sector and a rise in interest costs. Over the last few years, it has acquired companies in Europe and the US, and a slower-than-expected growth in international markets has affected its profitability.
Crompton Greaves said its second-quarter performance was better than the first quarter’s, with a 33 per cent increase in order intake, 11 per cent rise in consolidated net sales, 8.4 per cent rise in earnings before interest, taxes, depreciation and Amortization and 47 per cent rise in net profits.
Crompton Greaves chief executive officer and managing director Laurent Demortier said: “In a challenging global business environment, we are pleased to see that our latest innovated products such as wind farm offshore connection, solar distribution transformer and high voltage motors and equipment have been well received by customers globally. Going forward, we will pursue our effort to reduce operation cost and expect our energy efficient products and solutions to support our planned growth prospect.”
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“While the domestic power segment’s execution continued to remain weak, a depreciating rupee and clearance of euro 29 million (about Rs 180 crore) worth of orders in the MENA region, whose deliveries were delayed in the previous quarter, would have helped the international segment record a better-than-expected performance during the quarter,” said research firm Spark Capital.
Crompton Greaves has been facing the brunt of a slowdown in economic growth. It has lowered its revenue guidance to 10-12 per cent from 12-15 per cent. The stock market, too, has not been enthusiastic about the stock, following the depressing first-quarter results, which saw a 58 per cent drop in net profits, sale of shares by vice-chairman S M Trehan and the company’s decision to acquire a jet plane for Rs 270 crore.
According to a research report by Angel Broking in the second-quarter, Crompton Greaves stock has nosedived 41.4 per cent underperforming the Sensex by 28.7 per cent. After opening at Rs 165, its shares on Wednesday fell to an intra-day low of Rs 142. Finally, the shares closed at Rs 143.90.