ABB India powers ahead in Q2 as portfolio rejig pays off1 min read . Updated: 31 Oct 2018, 06:41 AM IST
ABB India's diversification helped improve overall profitability in Q2, but that failed to impress investors as it's share price slumped 1.9% after Q2 results were declared
ABB India Ltd staged a robust show in the September quarter (Q2) as it steered through macroeconomic headwinds. What led to the significant beat in operating performance and order flows was the conscious effort over several quarters to shift focus towards the new-age businesses while improving efficiencies in the traditional businesses.
This was mirrored in the 22% jump in order flows to ₹ 2,355 crore and 31% revenue growth from the year-ago period, in an otherwise dull macroeconomic environment. According to the management, portfolio diversification helped as business came in from core infrastructure areas such as power transmission and from industrial automation. The Indian arm of the Swedish capital goods giant has consciously focused on robotics and automation that help businesses improve efficiencies.
The wider canvas of industries such as pharmaceuticals, foods and beverages, mining, smart cities, and transportation compared to the earlier focus on core sectors such as steel and cement, gave a leg-up to order growth. ABB India’s order book therefore rose by 6% year-on-year.
From a revenue perspective, the power grids segment and robotics outperformed with year-on-year growth of 71% and 30%, respectively. The same was true of profitability where these two segments posted robust margins. The management did reiterate analysts’ concern over the electrification products segment, where sustaining profitability would be increasingly difficult, given stiff competition.
That said, ABB India’s diversification helped improve overall profitability. Ebitda (earnings before interest, tax, depreciation and amortization) margin at 7.7% was 70 basis points wider than the year-ago period, which was also higher than Bloomberg’s average estimate of 5.8%.
The company’s beat on net profit, which vaulted 30% from a year earlier to ₹ 108 crore, was a result of strong and timely execution during the quarter.
All this however failed to impress the Street. On Tuesday, the ABB India stock closed 1.9% lower at ₹ 1,209, perhaps on overall concerns that the forthcoming quarters would be dull given the general election and the concerns over economic conditions. ABB India shares also reflected the parent’s stock performance, where lower-than-expected orders and concerns on the European economy weighed on investor sentiment.