Suzlon Energy’s stock slumped 12.9% on Tuesday to Rs 58.25, as compared with a 3% fall in the BSE Sensex.
The company had announced disappointing September quarter results on Saturday.
It also cut its volume guidance for FY2010 by 25% to 1900-2100 mega watt (mw) and said it expects breakeven at profit before tax level for FY10, at around 2000 mw. This precludes the possibility of profits this fiscal as breakeven is a no-profit, no-loss situation.
The compamy’s consolidated net loss increased to Rs 355.51 crore as against Rs 22.84 crore in the year-ago quarter, impacted by a 30.7% year-on-year decline in total operating revenues to Rs 4,835.23 crore. Poor operating performance and higher interest and depreciation cost further worsened net profit performance.
Revenues from the wind business, which accounted for 39% of consolidated revenues, declined 55% due to a sharp 61% drop in sales volumes to 283 mw. Lower volumes resulted in under-absorption of fixed costs, leading to an ebitda loss of Rs 149 crore in the wind business.
Slower rate of decline in total expenditure (down 25.2%) resulted in very weak operating performance with operating margins declining 719 basis points (100 basis points make one percentage point) to 2.51%. Employee cost increased 7%, hurting operating performance.
A 35% increase in interest expenses to Rs 292.6 crore and a 48% increase in depreciation costs to Rs 188.04 crore affected profitability at the net level.
Going forward, Suzlon intends to optimise its debt profile by refinancing and pursue its planned strategic divestment of Hansen Transmission to decrease its total debt. At September end, its consolidated net debt stood at Rs 13,762 crore.
A stake sale would help the company de-leverage its balance sheet. However, analysts say Hansen sale could take longer than expected given the Belgium-headquartered company’s losses in the first half of the year and low capacity utilisation. The company also needs to secure more orders going forward.
Near-term outlook for the stock appears bleak. Investors should wait for outlook to improve before considering it.
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