Thermax held a conference call on Jan 29, 2008. In the conference call the company was represented by its Managing Director.
Key takeaways of the conference call
Total income for the quarter was Rs 803.8 crore, a fall of 6% and a PAT of Rs 72.3 crore which translate into a decline of 4%.
About 79% of the revenue for the quarter came from energy segment and 21% came from environment. For the nine months the share was 75.5% from energy and 24.5% from environment. Similarly the domestic: international mix is 69:31. For the nine months the international accounts for 25.5%.
Set back at the operational level is largely as the company deliberately slowed down the productions as there were some liquidity issues with the customers and there was no point in pushing the customers.
Order book of the Thermax Group as end of Dec 31, 2008 was Rs 4103 crore. The standalone order book was Rs 3854 crore, which was higher by about 44% on yoy basis.
Order inflow of Thermax standalone is Rs 731 crore for the quarter and its Rs 863 crore for the Group.
For the group the Order inflow breakup in-terms of Energy and Environment for the quarter is Rs 716 crore for energy and Rs 146 crore for environment. For YTD the share of energy in order inflow is Rs 3422 and environment is Rs 522 crore.
Order booking was in accelerating pace in the first half of current fiscal and since October onwards there is hesitance in finalizing orders. The month of November and December is not satisfactory in terms of order finalization. Delay in order finalization does not mean dip in enquiry, the company continues to have strong enquiry but only the finalization is delayed.
Cancellation of orders – Orders worth Rs 116 crore has been cancelled and that has been accounted for in the books. Order cancelled – 120 crore – export order from Canada which related to a petrochemical plant order and the rest of the orders were fairly well spread in sponge iron industry. The cancellation has been largely in orders where the client tried to convert from furnace oil to coal. With furnace oil price falling the viability of coal fired has diminished.
There are 3 big orders in the books of the company that is the Rs 800 crore worth Essar order, the Rs 414 crore worth order from SAIL and the order from Bramini Steels of Karnataka worth about Rs 340 crore in books of Thermax stand alone and Rs 100 crore in books of subsidiary. All the three orders were in engineering stage. Revenue recognition has started only for the SAIL order and for the rest two the revenue recognition is not expected in the current quarter.
In FY 2010 execution will be slower than earlier across the world as liquidity continues to be a problem. In prevailing economic conditions and credit squeeze many of the industries are reviewing their capex plans.
Broadly, the company’s order book position consists of orders from sectors such as power, cements, metallurgy, refinery and steel in equal proportion. The company expects no new investments coming in sectors of cement, steel and Metallurgy in the next 12 months. But the power sector is going to be strong. The investment in refinery projects across the globe is going to continue where the company expects supply of heaters etc. The FMCG and food processing industry is not going to cut down its capex.
Next year we have the capacity in place, if market grows we will be growing.
Thermax instrumentation is expected to clock profits by end of the current fiscal.
Currently the company has 12 ongoing projects. The company has put in place waste elimination process so as to save unnecessary costs. The company is taking all efforts to maintain current margin.
America market for absorption chillers is around USD 30 odd million. Out of which the Thermax targets about US 7-10 million.
In Utility segment the company has two more enquiries for which it has already Pre Qualified. The team is working on tendering bids for these two orders.
Margins of the company are related to product project mix. When EPC project are billed the margin will dip and when the standard products are more the margin will be higher.
With industries reviewing their capex plans especially the private players the company has shifted its focus on Government and PSU orders. The company has one big order from SAIL, Order worth Rs 250 crore for heaters from PSU oil refineries, municipal orders.
Start focusing on large order in water segment – bagged one order of around Rs 20 crore. The company has also got some orders in municipal segment.