Crompton Greaves

Crompton Greaves (CG), the electrical equipment major registered 67% fall in its consolidated earnings (after minority interest) to Rs 77.14 crore for the quarter ended Dec 2011, even while its revenue was up by impressive 26% to Rs 3027.95 crore. The fall in earnings was triggered firstly by sharp 820 bps contraction in operating margin and precipitated further by higher interest cost, depreciation and higher tax incidence.

• Standalone revenue though higher by 16% for the quarter, the revenue of subsidiaries especially overseas subsidiaries was higher by 41% to Rs 1403.49 crore which ultimately boosted the consolidated topline up by 26%. The subsidiary financials are derived by deducting standalone financials from consolidated financials. Similarly the steep downside in consolidated bottomline is also triggered by the net loss of Rs 51.15 crore (against a profit of Rs 55.29 crore in Q3FY11) at the end of overseas subsidiaries as the standalone net profit was up by 28% to Rs 126.7 crore.

• Surge in subsidiary revenue in rupee terms is largely on account of forex impact as Euro appreciate by 21% against rupee during Oct-Dec 2011 period. In addition to forex benefits, there was benefit in the form of incremental revenue coming from Emotron of Sweden and QEI of USA which was acquired during the quarter ended June 2011. Though the newly acquired companies contributed/escalated the sales. As the consolidated financials of Dec 2011 include the financials of the two newly acquired companies as well and that of corresponding previous period don't, the financials of Quarter ended Dec 2011 is not comparable to that of corresponding previous period. Moreover the loss of subsidiary financials as derived by subtraction of standalone financials from consolidated ones, seems largely on account of the company executing significant overseas orders at nearly zero margin or at loss.

• The upside in subsidiary revenue to the extent of 41% was largely driven by strong 36% jump in the power segment revenue of subsidiaries (largely of overseas power subsidiaries)to Rs 1314.63 crore. The industrial systems revenue of subsidiaries too jumped by 176% to Rs 86.27 crore albeit on a low base. But at segment level both power systems and industrial systems at subsidiary level has registered a loss of Rs 29.31 crore (Vs. a profit of Rs 85.85 crore in Q3FY11) and Rs 7.26 crore (Vs. a profit of Rs 5.65 crore in Q3FY11) respectively.

• On standalone basis the segment revenue of power systems was up by 30% (to Rs 754.23 crore) but its segment profit was lower by 29% to Rs 81.06 crore on sharp erosion in margin. Similarly despite growth in segment revenue the consumer products and industrial systems registered fall in segment profit by 11% each to 59.26 crore and Rs 56.70 crore respectively. The segment revenue of consumer products and industrial systems were up by 6% (to Rs 503.28 crore) and 11% (to Rs 388.61 crore) respectively. This was largely on account of the company struggle to pass on the incremental material cost to customers in the wake of increased competition especially in consumer products.

• Strong fall in profitability across all segments is on account of lower realisation and margin pressure in case of power systems, inability to pass on the incremental material cost in case of consumer products and fixed price contracts etc. The material cost as proportion to sales (net of stocks) jumped by 240 bps (to 53.3%)at consolidated level. The traded goods was up by 190 bps to 12.5%, the staff cost was up by 220 bps to 15% and other expenses was up by 100 bps to 12.3%. The company though managed to drag down other costs significantly on consolidated level the sharp rise in material cost could not be offset completely leading to contraction in margin. This allround cost rise dragged the OPM down by 820 bps at consolidated level.

Nine month performance

Consolidated revenue was higher by 15% to Rs 8171.22 crore and its operating profit was lower by 39% to Rs 590.46 crore with the operating margin crash to 7.2% from 13.7% in the corresponding previous period. Eventually the PAT was lower by 57% to Rs 271.57 crore and the net profit (after minority interest) was lower by 57% to Rs 273.27 crore.

Consolidated order booking for the quarter was higher by 66%yoy to Rs 3401 crore. OF the order inflow for the quarter the power sector orders were Rs 2939 crore (up 82%yoy) and industrial orders were Rs 462 crore (up 6%yoy). On the back of strong order book the order backlog was up by 17%yoy to Rs 8183 crore.

Order intake for 9MFY12 was up by 16% to Rs 7368 crore.

Other developments

Promoter holding as end of Dec 2011 has increased marginally to 41.69% compared to 40.92% as end of June 2011. Non encumbered part of promoter holding (as % to total share capital of the company) as end of Dec 2011 quarter stood at 39.53% compared to 39.59% as end of Sep 2011.

The stock hovers around Rs 144.90.

 Crompton Greaves: Consolidated Results

Crompton Greaves: Results

Crompton Greaves: Consolidated Segment Results

 Crompton Greaves: Standalone Segment Results