(The Hindu Business Line 21st May 2008)
Headwinds in the form of defective blades supplied and issues of enhancing stake in REpower did not deter the wind turbine maker Suzlon Energy from posting consolidated revenue growth of 71 per cent for the year ended March 2008. While consolidated sales for the year stood at Rs 13,679 crore, net profits before exceptional items grew 34 per cent to Rs 1,168 crore. Order book, excluding Hansen and REpower, stood at Rs 1,8308.5 crore with 95 per cent from international markets.
The revenue growth assumes significance at a time when the industry (globally) has grown by an average of 24 per cent.Higher realisation
Suzlon’s operating profit margins continued to hover around 13 per cent for the March quarter and full year. Operating profit margins have been on the decline since the company made global acquisitions. However, profit margins remain superior to global players. The company has seen increase in realisations, both in the domestic and export market. Realisations in the domestic market, at Rs 5.7 crore per MW, remain superior to the international market realisations.
International volumes, however, made up for the relatively lower realisations. This trend may, however, see a change in the next couple of years, as the company has indicated that its present international order book would carry an average realisation of Rs 5.28 crore per MW, a 20 per cent increase over FY08. High volumes, combined with increase in realisation in international markets, are likely to improve margins, provided the company withstands the soaring steel prices.
While the company has pass-on clauses for raw material hikes, the escalation agreement allows for about 60 per cent pass-on, with the rest required to be absorbed by Suzlon. High volumes have so far provided some cushion to absorb the costs.Exceptional items
The company incurred exceptional items (net of tax) of Rs 150 crore being provision made for retrofit programmes, following defects in blades of 2.1 MW turbine. This provision wiped off close to 13 per cent of its profits after tax before exceptions. The company has stated that it has resolved the issue since and started on a retrofit programme.
Suzlon would have an option to acquire Areva’s stake in REpower over the next one year, as the option of selling its stake is open for Areva for one-year beginning May 24. While Suzlon currently holds 33 per cent, its voting rights come to 87 per cent. However, there have been reports of the company not being able to tap REpower for technology. Under the German law, REpower is not obliged to transfer technology to minority owners such as Suzlon, unless they become dominant owners by way of acquiring minority shareholding as well. For this, Suzlon may have to wait for Areva to offload its stake.
On the other hand, Suzlon has indicated that the current share price of REpower offers good opportunity to sell the stocks. Pending clarity on its shareholding position in REpower in the coming year, the company may not be effectively able to tap the advanced wind turbine technology of the German company.
Headwinds in the form of defective blades supplied and issues of enhancing stake in REpower did not deter the wind turbine maker Suzlon Energy from posting consolidated revenue growth of 71 per cent for the year ended March 2008. While consolidated sales for the year stood at Rs 13,679 crore, net profits before exceptional items grew 34 per cent to Rs 1,168 crore. Order book, excluding Hansen and REpower, stood at Rs 1,8308.5 crore with 95 per cent from international markets.
The revenue growth assumes significance at a time when the industry (globally) has grown by an average of 24 per cent.Higher realisation
Suzlon’s operating profit margins continued to hover around 13 per cent for the March quarter and full year. Operating profit margins have been on the decline since the company made global acquisitions. However, profit margins remain superior to global players. The company has seen increase in realisations, both in the domestic and export market. Realisations in the domestic market, at Rs 5.7 crore per MW, remain superior to the international market realisations.
International volumes, however, made up for the relatively lower realisations. This trend may, however, see a change in the next couple of years, as the company has indicated that its present international order book would carry an average realisation of Rs 5.28 crore per MW, a 20 per cent increase over FY08. High volumes, combined with increase in realisation in international markets, are likely to improve margins, provided the company withstands the soaring steel prices.
While the company has pass-on clauses for raw material hikes, the escalation agreement allows for about 60 per cent pass-on, with the rest required to be absorbed by Suzlon. High volumes have so far provided some cushion to absorb the costs.Exceptional items
The company incurred exceptional items (net of tax) of Rs 150 crore being provision made for retrofit programmes, following defects in blades of 2.1 MW turbine. This provision wiped off close to 13 per cent of its profits after tax before exceptions. The company has stated that it has resolved the issue since and started on a retrofit programme.
Suzlon would have an option to acquire Areva’s stake in REpower over the next one year, as the option of selling its stake is open for Areva for one-year beginning May 24. While Suzlon currently holds 33 per cent, its voting rights come to 87 per cent. However, there have been reports of the company not being able to tap REpower for technology. Under the German law, REpower is not obliged to transfer technology to minority owners such as Suzlon, unless they become dominant owners by way of acquiring minority shareholding as well. For this, Suzlon may have to wait for Areva to offload its stake.
On the other hand, Suzlon has indicated that the current share price of REpower offers good opportunity to sell the stocks. Pending clarity on its shareholding position in REpower in the coming year, the company may not be effectively able to tap the advanced wind turbine technology of the German company.
Comments