Highlights of the call
The company has crossed milestone of Rs 4000 crore of turn over in FY 09. The total Revenues of the company stood at Rs 4063.85 crore (up by 33%), of which Rs 1500 crore came from International operations. Net Profit of the company was up by 21% to Rs 251.10 crore.
For the quarter ended March 09, the company has recorded 48% growth in its top line to Rs 1253.84 crore mainly driven by international revenues which increased by more than 3 folds (205%) to Rs 597 crore. However, the domestic revenues were nearly flat at Rs 658 crore as against Rs 655 crore in the corresponding previous quarter.
EVA (Economic Value Added) of the company by the end of FY 09 is positive and stood at 22%.
The overall carry forward order book for Electro Mechanical segment as on end of March 09 stands at Rs 4718 crore (as against Rs 4623 crore in corresponding previous year). The domestic order book pertains to Rs 990 crore of the total order book. In addition, the company has bagged Rs 300 crore worth of works from Kolkata and Chennai and an order from Hindustan Zinc also. The company has also observed steady growth in the Water Treatment business and has bagged Rs 50 crore worth of orders in FY09.
In the domestic market, the thrust on offering integrated MEP solutions continue and the same has resulted into order book position per year end showing a growth of 17%. The domestic electro mechanical business order book included 65% of stadium projects for prestigious Common Wealth Games 2010 in New Delhi, Godrej waterside Tech Park, Kolkata and orders in Industrial Sector.
The company is confident in portraying its growth rate in FY10 also, as it has covered its execution cycle for next 1-1 ½ years with significant orders to generate cash flow.
The Electro Mechanical projects and services segment revenues grew by 55% principally through execution of large overseas projects. These include prestigious projects such as District Cooling Plant at Dubai, International finance center and Burj tower projects (Dubai, UAE); Formula 1 Racing Track, Ferrari experience Ethihad towers complex (Abu Dhabi UAE); Bahrain City center (Bahrain), Sidra Medical and research centre (Doha, Qatar); and Sentosa Bay District cooling plant (Singapore).
The Burj Tower project that was a part of Dubai projects will be completed by September 09. The Ferrari project is expected for completion by December 09.
The Company is facing constraints largely on maintaining the number of days’ receivables in Electro Mechanical projects and services segment. The Company has been successful in growing its MEP business and this business comprises about 25% of the Order Book.
On the international front, various regions in the Middle East have announced their budgets for the coming year. According to these, there are likely to be significant Government backed investments in Abu Dhabi, Qatar and Saudi Arabia giving a boost to their economies. Crude oil prices seem to have stabilized over the recent past, and if they continue at similar levels, there will be less concern about budget deficits.
The company has also enquires from the international front particularly in Abu Dhabi and Qatar, but the order inflow time will be very high ranging from to 9-12 months. However, Irrespective of crude prices, the company feels that governmental investment in infrastructure and industrial projects in these regions are likely to continue, although their pace of finalization and implementation may be somewhat slow.
On the domestic front also the order enquires have came down, but with the government stimulus packages and slow improvement in the scenario of capital formation, the company was bullish in acquiring orders in short to medium term.
In order to accelerate the presence in Industrial segment, Voltas acquired 51% stake in Rohini Industrial Electricals in September 08. The company’s scope of Electro Mechanical offerings has consequently widened to include electrical and instrumentation contracts for projects in the domains of power, Steel, Oil and Gas, Pharma, Textile and other industries. This can be leveraged by both the domestic and overseas markets. Rohini Industrial Electricals has reported robust growth of 90% both in the top line and bottom line for FY09.
The Engineering Products and services segment constitute Textile machinery business, Machine handling business and Mining and construction business. This segment has reported dip in the profits at the segment level by 77% to Rs 7.12 crore, as the economy lags in capital formation.
The slowdown in Textiles Machinery business continues. However, with the garment exports posting rising trend in recent months supported by low rupee value against USD, the industry expects that the Textile Machinery market may turn the corner post mid-2009, although the recovery may be slow.
Material Handling Business has been slowing down in the recent past. An important positive is that with Rupee depreciation, imported machines have become prohibitively expensive, at both the low and high ends, making the market less competitive for Indian products.
The Mining and construction business has shown slow down along with the industry. The company has accumulated lot of Inventory in this business, which will be liquidated by the end of H1FY10.
The unitary cooling products business segment revenues achieved a growth of 11% to Rs 913.75 crore. In the room air conditioners, Voltas has registered sales growth of 8% as against market growth of 6% and increased its overall share to 16.5%. This was possible due to innovative product offerings based on energy efficiency and expansion reach. Commercial Refrigeration’s produces developed and manufactured at company’s new plant at Patnagar exhibited growth due to better product offerings and increased focus. The company has geared itself for making Pantnagar as the base for manufacturing the unitary cooling products.
The cash in hand of the company was Rs 121 crore, which is invested in Mutual funds as on March 31st 09. As on date the cash in Investments of the company has increased to Rs 190 crore.
Turnover per Rupee of employee cost, in the domestic market for Q4 FY09 is higher at Rs 16 against Rs 14 in the same quarter last year. In the similar lines, on the international front, it improved to Rs 8 per employee as against Rs 6 in the corresponding previous year.
The Board of Directors has recommended a dividend of Rs. 1.60 per share of Re 1/- each (160%) for the year 2008-09 (previous year: 135%).