Mumbai: Crompton Greaves sees a slower-than-expected growth in its overseas business and some delays in order pickup in the domestic market, top executives said on Wednesday.
The Mumbai-based firm expects its international business to grow between 5-7% in euro terms in FY12, slower than the 8-9% it forecast earlier, CEO Laurent Demortier said in a conference call that was televised by the business news channels.
The below-forecast profits and the gloomy business outlook have sent the company’s shares skidding 29% between Tuesday and early trade on Wednesday. Shares in Crompton, which is at present valued by the market at $2.99 billion, has lost close to 44% since beginning of the calendar year.
“We believe this is only a short term phenomena. I guess once the unrest in the Middle East and Africa settles down we should be in a much better position than we are today,” said Chief Financial Officer Madhav Acharya in the call.
The firm is now betting on good demand from the wind offshore sector in western Europe, while it expects better domestic orders in the next quarter, said Demortier, who joined Crompton eight weeks back from a bigger global rival Alstom where he was a senior vice president.
Overseas business comprises half of the company’s consolidated revenues with Europe comprising around 17%, as per a Kotak Institutional Securities report.
The Gautam Thapar-led Avantha group firm said on Tuesday its consolidated net more than halved for April-June quarter, sending its shares down more than 15%, the steepest fall in the past 27 months.
The competitive pressures in the domestic market and a drop in revenue in Europe has hit the margins for the firm, the officials said in the conference call.
The margin contraction stood at a sharp 550 basis points, the Kotak report said.
Crompton Greaves posted a drop in overseas revenues for the June quarter due to a general slowdown in that geographic segment, said Acharya, adding, unrest in Africa and the Middle East earlier this year also hurt business in the region.
“There is a sizeable drop in topline in Europe in the international operations which is a primary cause for our lower margins,” Acharya said.
The company has manufacturing facilities in France, Hungary, Belgium and Canada among others.
Crompton is seeing a delay in new orders in the domestic market due to a slowdown in project finalisation by customers, Demortier said.
“Due to some slowdown in project infrastructure in India...customers are taking a little bit more time to pick up the equipment on site.”
At 12:33 a.m., shares in the firm were trading down 17.16% at Rs 172.55 , near its 52 week low of 170.55, in a Mumbai market that was little changed.