Suzlon: are we there yet?1 min read . Updated: 03 Aug 2015, 01:10 AM IST
Average price realizations fell marginally as well, although economies of scale in the domestic business helped the company improve profit margins at the operating level
Suzlon Energy Ltd reported its first consolidated net profit in the last 14 quarters, but this was because of a one-time gain. Before accounting for this, the company reported a pre-tax loss of ₹ 280 crore, which is better than the loss of ₹ 630.5 crore in the year-ago June quarter.
So, while things have certainly improved, Suzlon is nowhere near being out of the woods. According to the company, its normalized Ebitda, or earnings before interest, taxes, depreciation and amortization, amounted to 15.3% of revenue for the Suzlon Wind business, the highest in the past three years. Ebitda has been normalized for forex related income/expenses and liquidated damages.
Volume in the domestic market rose by 28%, although devoid of sales in the international market, Suzlon Wind’s overall volume fell by more than 8% from a year earlier. Average price realizations fell marginally as well, although economies of scale in the domestic business helped the company improve profit margins at the operating level. Net finance costs fell by 38%, sequentially, and a further drop is expected in the September quarter. This isn’t surprising—this year, the company sold wholly-owned subsidiary Senvion SE for €1 billion, and later announced a preferential allotment worth ₹ 1,800 crore to a strategic investor.
Of course, while net debt obligations have reduced substantially, they remain high at ₹ 7,010 crore, excluding foreign currency convertible bonds worth over $300 million. Net finance cost in the Suzlon Wind business, at ₹ 293 crore last quarter, remained higher than the normalized Ebitda of ₹ 237 crore. In other words, cash burn appears to continue at the company.
Of course, these are still early days as far as the company’s recovery process goes; and to be fair to the company, the initial signs are heartening. As pointed out in this column earlier this year, the Senvion sale was good riddance, as it would help the company focus on the domestic market—its area of strength.
But as the company’s subdued share price performance shows—almost flat in the past one year, despite the massive deleveraging—there’s still a long way to go.