Suzlon posts Q3 loss on replacement expenses

Suzlon posts Q3 loss on replacement expenses
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First Published: Fri, Jan 30 2009. 11 16 PM IST
Updated: Fri, Jan 30 2009. 11 16 PM IST
Mumbai: India’s biggest maker of wind turbine generators and the world’s fifth largest, Suzlon Energy Ltd, unexpectedly reported a loss in the third quarter (Q3) after making payments to replace faulty equipment and after the value of its orders declined.
The company warned it expects demand to moderate in 2009 after rapid growth in recent years, as recession in major economies and falling oil prices weigh, but sees a revival from 2010. It expects revenue growth in the US to halve in the fiscal year starting April.
Suzlon’s loss was Rs58.97 crore in the three months ended 31 December, against a profit of Rs152 crore a year earlier.
It reported exceptional items of Rs449 crore, including Rs233 crore of costs related to blade failures in its wind turbines. It also made an additional provision of $35 million (Rs172 crore today) for its blade retrofit programme.
“These are one-off, one-time events, which we will not have in this quarter. Our operating performance has improved substantially,” chief operating officer Sumant Sinha told reporters. “From the operating standpoint, the company continues to be healthy.”
But Suzlon may face a slowdown in orders as falling oil prices make alternative energy sources less attractive and access to credit tightens due to the global recession. The firm’s shares had dropped 84% last year on concerns that its equipment was faulty as some US customers cancelled orders after Suzlon’s blades cracked.
“Suzlon doesn’t seem to have got any big orders from June,” said Chintan Mewar, an analyst at Mumbai-based Finquest Securities Pvt. Ltd.
Orders, excluding those of units, were valued at Rs10,387 crore. That compares with Rs14,050 crore the company reported on 31 October and Rs17,110 crore a year earlier. Group revenue more than doubled to Rs6,893 crore in Q3 from Rs3,169 crore in the year-ago period.
“The long-term fundamentals of the wind industry remain strong,” Suzlon chairman Tulsi Tanti said in a statement. “We see an upswing in the industry’s growth from 2010.”
Things look very good in the second half, especially as the company says it is pursuing orders, said Mewar of Finquest Securities, which maintained its “buy” rating on Suzlon.
Suzlon shares rose nearly 6% to end at Rs47.30 on the Bombay Stock Exchange on Friday.
The company expects its retrofit plan to end by June. It had set aside Rs590 crore for possible payments to clients who may have incurred output losses due to defective blades. Mark-to-market losses on foreign exchange contracts were Rs124 crore, Suzlon said.
Morgan Stanley cut its price target on Thursday for Suzlon to Rs46.5 from Rs52.45, saying the firm may struggle to repay loans because of lower margins and fewer new orders.
Janaki Krishnan of Reuters contributed to this story.
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First Published: Fri, Jan 30 2009. 11 16 PM IST