Mumbai: Capital goods maker Thermax’s margins won’t improve in FY2012 but would try to retain them, managing director M. S. Unnikrishnan said on Wednesday.
“I don’t think I will be able to improve margins next year (FY’12) though that’s my wish. I need to be working hard to retain the margins...,” Unnikrishnan told Reuters over the telephone.
Margins are seen pressured due to higher interest rates, slower capital investments by the industry and higher commodity prices, he added.
Stepping up its fight against stubbornly high inflation, the Reserve Bank of India (RBI) on Tuesday, raised interest rates by 50 basis points and vowed to battle price pressures even at the cost of some economic growth.
A Reuters’ snap poll of 11 respondents put expectations for further interest rate increases for the remainder of 2011 at 75 basis points.
The rate hike is expected to put pressure on investments in the manufacturing segment in the short term, chief economic advisor said after the central bank’s annual policy on Tuesday.
“The demand (in the economy)... is a factor which is going to be continuing to support the capital investment in this point of time. But it (capital investment) will not grow at the rate that we have seen in the recent past,” Unnikrishnan said.
Thermax expects its order book to grow but won’t “gallop upwards,” as FY2012 is not an “easy-going” year for the company and for the sector.
“We are putting aggressive marketing efforts to ensure that we are able to pick orders which are going to be finalized in the market,” he said.
Its consolidated order backlog as on 31 March was Rs6,446 crore as against Rs5,966 crore a year ago, it said in a earnings statement on Tuesday.
The company relies on businesses, including water, chemicals, services and cooling, for incremental orders that will compensate for any lack of traction from the infrastructure side, he said.
He expects Danstoker, a European boiler maker that it had acquired in November 2010, to book incremental orders going ahead.
“It should have the improvement in order booking in comparison with the same period of the previous year.”
On Tuesday, the company had said its net profit in January-March stood at Rs127 crore compared with a loss of Rs156.7 million a year ago, beating the consensus estimate of Rs118 crore in a Reuters’ poll of brokerages.
At 12:55 pm, shares in the firm were down 4.02% at Rs614.95, while the benchmark index was 0.47% lower.