Orders are flowing in but customers are going slow on projects and that’s hurting the firm.
It might not be the best of times for the industry but orders continue to flow in at the Rs 3,204 crore Thermax. The Pune-based firm saw oders increase 26 per cent y-o-y during the December 2008 quarter compared with an increase of just 3.5 per cent for Siemens and a fall of 37 per cent y-o-y for ABB. In fact,despite the challenging environment for makers of capital goods, Thermax was able to expand its operating profit margin(opm), adjusting for a notional foreign exchange loss of Rs 10 crore, by 100 basis points, to 13.3 per cent.
The company had fortunately used up most of its inventory of high-cost raw materials and having renegotiated fresh terms for its new contracts, should be able to sustain margins at these levels. Bigger players like ABB posted an opm of 12.3 per cent in the December 2008 quarter while Siemens turned in an opm of 9.8 per cent. Crompton Greaves’s margin was 10.5 per cent.
The environment segment did particularly well, growing 14 per cent and contributing around 23 per cent to the firm’s revenues much more that the 19 per cent in the corresponding period of 2007-08. It’s the key energy segment that has lost momentum — sales down about 9 per cent —with customers not really moving ahead on their projects and taking time to finalise orders.
The sectors that appear to be seeing a slowdown are cement and metals;however, the power sector is expected to see investments though at a slower pace. In the nine months to December 2008 Thermax’s net sales stayed pretty much flat at Rs 2,316 crore. Despite this, better operating efficiencies have resulted in the profit before tax increasing by 22 per cent y-o-y, after adjusting for around Rs 65 crore of forex losses.