Suzlon Energy
Consolidated Net up 29% restricted by higher EO
Suzlon Energy, the domestic wind energy leader on consolidated basis has turned in strong revenue growth of 69% (to Rs 4923.75 crore) for the quarter ended Mar '08. But faced with pressure at operating level where the operating margin eroded by 230 basis points to 14.7%, the growth at operating profit stood restricted to 46% to Rs 724.62 crore. The growth at net profit level before profit from associates and minority interest stood restricted to 27% to Rs 456.51 crore. But for higher EO expense (net of tax) amounting Rs 82.97 crore as against nil in the corresponding previous quarter the growth at bottomline growth would have been steeper. EO for the quarter was largely expense towards rotor blade retrofit programme.
On standalone basis the sales was higher by 34% (to Rs 2744.40 crore). With OPM expand by 70 basis points to 22.4%, the operating profit stood higher by 38% to Rs 615.80 crore. Finally the net profit was up by just 10% to Rs 482.55 crore as the profits were hit by higher tax incidence and higher EO expense during the quarter.
The consolidated order book of the Company as on May 19, 2008 was Rs 18308.59 crore (3454.25 MW) compared to Rs 9,486 crore (1,958 MW) as end of May 11, '07. International orders amounts Rs 17422.10 crore (3294.15 MW) comapared to Rs 8,078 crore (1692 MW) in the corresponding period last year. Even the international order on strong foot the domestic orders have declined. The domestic orders stood at Rs 886.49 crore (160.10 MW) comapared to Rs 1408 crore (266 MW) as on May 11, '07.
Suzlon Energy is the world's leading wind turbine generator (WTG) manufacturer. The Company has been ranked the 5th largest in the world in terms of capacity installed in 2005 and holds a global market share of 10.5% in 2007. And the company is the largest in India and Asia as well in terms of market share. The Company has been the market leader for nine years consecutively, installing over 50% of the capacity added. The company offers customers total wind power solutions including consultancy, manufacturing, operations & maintenance services.
Consolidated quarterly performance
Consolidated sales for the quarter ended Mar '08 was higher by 69% to Rs 4923.75 crore. The segment revenue of wind turbine was higher by 86% to Rs 4084.93 crore (or 81% of total sales) while that gear box (Hansen transmission business) stood at Rs 865.23 crore, a rise of 33% accounting 17% of total sales The segment revenue of others segment grew by 54% to Rs 109.03 crore (2% of total sales).
Escalating commodity prices resulting in upward cost push have resulted in sustained pressure on margin. Since the order book to delivery period for international orders being longer compared to domestic orders which is not more than 6 months the company was forced to absorb part of incremental material cost despite the pass through in international orders. The pass through normally covers only to the extent of 65% of the rise in material cost. Further the margins were under pressure in change in duty structure in US and tax structure in Brazil as the old orders have not factored these additional costs. Reflecting this the segmental EBITDA margin of both Wind Turbine as well as Gear Box business were lower by 480 bps (to 12.5%) and 330 bps (to 18.7%) respectively. Material cost which as a proportion to sales net of stocks was higher by 260 bps to 68.1%. Even the staff cost and OE was lower by 50 bps and 10 bps respectively that could not cushion the rise in material cost leaving the margin to erode by 230 bps to 14.7%. Consequent to erosion in margin the operating profit was limited to Rs 724.62 crore, a rise of 46%.
Faced with erosion in margin, the segment profit of both wind turbine generators and gear box was limited to 34% and 13% despite higher revenue growth. On a segment revenue growth 86% the segment profit of WTG was higher by just 34% to Rs 508.67crore. Similarly the segment profit of gear box stood higher by 13% to Rs 161.76 crore on a revenue growth 33%.
The other income more than doubled to Rs 95.92 crore, a rise of 107%. The interest cost was higher by 33% to Rs 128.98 crore and depreciation was higher by 63% to Rs 97.78 crore. As result the PBT was higher by 54% to Rs 593.78 crore.
After accounting for taxation the PAT before EO & minority interest was higher by 50% to Rs 539.48 crore. Taxation for the quarter was higher by 112% to Rs 54.30 crore. The net profit before minority interest was higher by 27% to Rs 456.51 crore. But for higher EO expense (net of tax) amounting Rs 82.97 crore as against nil in the corresponding previous quarter the growth at bottomline would have been steeper. EO for the quarter was largely expense towards rotor blade retrofit programme. Eventually the net profit stood at Rs 464.82 crore, up 29% after adjusting for minority interest and profit on associate of Rs 37.44 crore and Rs 45.75 crore respectively.
Consolidated full year performance
Consolidated sale for fiscal ended Mar '08 was higher by 71% to Rs 13679.43 crore. With OPM skid to 14.1% from 16.2% the Operating profit was restricted to Rs 1924.45 crore, a rise of just 49%. Other income was up 49% to Rs 1924.45 crore. Interest cost and depreciation was up by 111% (to Rs 532.03 crore) and 68% (to Rs 289.36 crore). Thus the PBT was up by 41% to Rs 1367.61 crore. After accounting for taxation (up 93% to Rs 199.29 crore), the PAT was higher by 35% to Rs 1168.32 crore. The EO net of tax was Rs 151.17 crore compared to nil in the corresponding previous period. Limited thus the net profit before minority interest and profit/ loss on associate stood higher by just 18% to Rs 1017.15 crore. The EO for the quarter consists of Rs 65.46 crore for site restoration and Rs 121.71 crore for rotor blade retrofit program. Minority interest stood at Rs 42.80 crore compared to Rs 77 lakh in corresponding previous period. The Share on profit of associate stood at Rs 55.75 crore compared to nil in corresponding previous period thus leaving the net profit up by 19% to Rs 1030.10 crore.
Standalone quarterly Results
Sales for the quarter ended Mar '08 was up by 34% to Rs 2744.40 crore. However a 70 basis point expansion in operating profit margin along with higher sales saw the operating profit to expand by 38% to Rs 615.80 crore.
Other income was lower by 1% to Rs 42.43 crore affected by loss on account of restatement of foreign currency liability aggregating to Rs 35.25 crore. Interest cost was higher by 9% to Rs 32.48 crore and depreciation was lower by 1% to Rs 24.96 crore. Thus the PBT was higher by 38% to Rs 600.79 crore. Taxation was Rs 35.27 crore compared to a write back of Rs 3.80 crore in corresponding previous period. Taxation in corresponding previous quarter is net of MAT credit availed by the company during that quarter. Finally PAT was higher by 29% to Rs 565.52 crore.
EO expense (net of tax) amounted Rs 82.97 crore as against nil in the corresponding previous quarter. EO for the quarter was largely expense towards rotor blade retrofit programme. Eventually the net profit was higher by 10% to Rs 482.55 crore.
Standalone yearly Results
For the year ended Mar '08 the company has reported 29% jump in revenue to Rs 6926.01 crore. As OPM expand to 23.0% from 22.2% the operating profit stood higher by 33% to Rs 1592.90 crore.
Other Income has zoomed by 43% to Rs 125.61 crore. Gain on account of restatement of foreign currency liability for the fiscal aggregate to Rs 4.4 crore.The Interest expenses have increased by 40% to Rs 125.34 crore while provision for depreciation has increased by 17% to Rs 86.21 crore. PBT for the quarter has posted a growth of 35% to Rs 1506.96 crore. Provision for tax was higher by 54% of Rs 90.08 crore. PAT stood higher by 34% growth to Rs 1116.88 crore.
The EO net of tax was Rs 151.17 crore compared to nil in the corresponding previous period. The EO for the quarter consists of Rs 65.46 crore for site restoration and Rs 121.71 crore for rotor blade retrofit program.
Limited thus the net profit stood higher by just 19% to Rs 1265.71 crore.
Final dividend @ 50%
The company to pay a final dividend of Rs 1 per equity share of Rs 2 face value each for FY '08.
Power transmission business foray
The company through its wholly owned subsidiary i.e. Suzlon Power Infrastructure (SPIPL) has made an application for a transmission license to the Gujarat Electricity Regulatory Commission ('GERC') at Ahmedabad on January 28, 2008. The transmission lines covered under the application will support the power evacuation arrangements and transmission of power for the wind sites and any other generating sources located in the Kutch region of Gujarat, India. In expectation of receipt of the license by SPIPL, Suzlon Gujarat Wind Park, another WOS of the Company has inventorised the costs incurred by it on developing a part of these lines till March 31, 2008. The extent of the costs which can be inventorised has been determined based on lower of cost incurred and valuation conducted by an external valuer. These lines would eventually be transferred to SPIPL, based on a valuation of the investment approved by the regulator.
Capex plans
Work on establishment of 3000 MW in new capacity are in advanced stage of progress with production scheduled to begin in July FY '09 and to reach full utilization levels by last quarter of FY '09. These new capacities will more than double the capacity of the company to 5700 MW.
Work on company's project to establish forging facilities of 70000 MT capacity and foundry facility of 120000 MT capacity too on schedule and these facility to start commercial production in Q3 FY '09.
Management Comment
Commenting on the result Tulsi R Tanti, the CMD of the company has quoted 'Our global growth story continues ever stronger. Suzlon has grown at over 71% compared to an industry average of 24%. We continue to outperform our peers on the global stage, and will continue our record breaking growth even in this supply restricted environment. Our global market share in CY 2007 grew to 10.5% up from 7.7% in CY 2006, registering significant increase of 30%.' Andre Horbach, CEO of the company quoted ' We entered several new markets in the last year, securing breakthrough orders in Nicaragua, Turkey, Spain, Brazil and taking the business from 16 to 21 countries worldwide.'.
The stock hovers around Rs 318.35.
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