Suzlon Energy drops after reverse turnaround in Q2

capital market | Mumbai |

Suzlon Energy lost 1.61% to Rs 15.25 at 9:17 IST on BSE after the company reported consolidated net loss of Rs 807.74 crore in Q2 September 2012, compared with net profit of Rs 48 crore in Q2 September 2011.

The company announced the results after market hours on Friday, 9 November 2012.

Meanwhile, the BSE Sensex was up 36.51 points or 0.2% at 18,720.19.

On BSE, 63,000 shares were traded in the counter as against average daily volume of 26.53 lakh shares in the past one quarter.

The stock hit a high of Rs 15.35 and a low of Rs 15.20 so far during the day. The stock had hit a record low of Rs 14.75 on 31 August 2012. The stock had hit a 52-week high of Rs 36 on 11 November 2011.

The stock had underperformed the market over the past one month till 9 November 2012, falling 9.62% compared with the Sensex's 0.58% fall. The scrip had also underperformed the market in past one quarter, declining 9.88% as against Sensex's 6.39% rise.

The small-cap company has equity capital of Rs 355.47 crore. Face value per share is Rs 2.

On a consolidated basis, Suzlon Energy's net sales rose 12.4% to Rs 5702.23 crore in Q2 September 2012 over Q2 September 2011.

Commenting the results, Mr. Tulsi Tanti, Chairman, Suzlon Group said, The first half of FY 2013 has been disappointing for the Suzlon Group. Our performance was affected by macroeconomic headwinds and policy uncertainties in some key markets; as well as by our internal challenges around liability management, and sub-optimal capital allocation to business operations. Despite this, key metrics point in the right direction: we have continued to grow revenues year-on-year; our product offerings are highly competitive in the marketplace; our firm orderbook stands at an extremely robust $6.84 billion; and, REpower continues to maintain a solid growth trajectory.

Mr. Tanti added, Looking ahead, we have taken concrete steps to sustain our mid-to-long term business performance. These steps will enhance our liquidity position and enable us to normalize our business operations and deliver on stakeholder commitments. We continue to work very hard on consolidation within the Group and maximizing all our operational synergies.

Mr. Kirti Vagadia, Chief Financial Officer, Suzlon Group said, Allocation of cash towards addressing financial liabilities, combined with working capital constraints, acted as a significant limiter on our performance in H1 FY 2013. Addressing this is now the central focus of our change agenda. We have launched several key initiatives - including Project Transformation - to bring down fixed costs, reduce working capital intensity, and continue our sale of non-critical assets as we right-size the business.

Mr. Kirti added, We have also started the process to comprehensively address our liabilities, inter alia, through the CDR mechanism and balance our long-term capital structure. As part of this exercise we are also working with our lenders to enhance our working capital facilities to match our business outlook. We believe this is the right path to stabilize the business. In parallel, the ongoing engagement with our bondholders continues to be constructive.

Suzlon Group's consolidated orderbook stood at approximately 5.4 GW (Rs 37290 crore/$6.84 billion) as on 9 November 2012; with new firm orders of 1,070 MW signed during the quarter (Q2 September 2012).

With regard to future business outlook, Suzlon said that independent estimates project 2012 to be a record year for wind installations despite macroeconomic headwinds and policy uncertainties. However, policy deterioration in some parts of Europe, such as Spain and Italy and the expiry of PTC in the US, is expected to result in a temporary dip in CY 2013, followed by a sustained recovery through 2016, with industry CAGR projected to reach 5.5 per cent over the 2011-2016 period, Suzlon said in a statement.

The offshore wind market grew 50 per cent, year-on-year, between H1 CY 2011 and H1 CY 2012, and is expected to grow at 46 per cent CAGR between 2011 and 2016, Suzlon said. The UK and Germany will continue to dominate the European market throughout the period, supported by strong incentive schemes, including offshore targets of 18 and 10 GW, respectively, Suzlon said in a statement.

Taking into account the liquidity constraints over the first half of FY 2013, a volatile market environment, and the timeline of the CDR process, the Management Team decided to suspend guidance for FY 2013. This was announced on 29 October 2012.

It may be recalled that Suzlon Energy last month said its bondholders rejected a proposal to extend the maturity of its overseas convertible bonds by four months. The company had requested the bond holders of $200 million zero coupon convertible bonds due October 2012 and $20.796 million 7.5% convertible bonds also due October 2012 for extension of maturity dates for each of the series of the bonds from 11 October 2012 to 11 February 2013.

The Suzlon Group is ranked as the world's fifth largest wind turbine supplier, in terms of cumulative installed capacity, at the end of 2011. The company's global spread extends across Asia, Australia, Europe, Africa and North and South America approaching 20,000 MW of wind energy capacity installed in 32 countries, operations across 33 countries and a workforce of over 13,000. The group offers one of the most comprehensive product portfolios - ranging from sub-megawatt on-shore turbines at 600 kilowatts (KW), to the world's largest commercial 6.15 MW offshore turbine - with a vertically integrated, low-cost, manufacturing base. The group - headquartered at Suzlon One Earth in Pune, India - comprises Suzlon Energy and its subsidiaries, including REpower Systems SE.

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