ABB
Earlier known as ABB Ltd, this MNC capital goods company did not have an enthusing second quarter ended 30th June 2013 ( year ending is 31st Dec). Its net revenue dropped almost 8% at Rs.1715 crore and net profit dropped 23% at Rs.40 crore. The only good aspect is that its strategy of being selective in project choice and keeping a tight lid on costs, improving operational efficiency helped its OPM, which YoY rose 180 bps at 6.2%. In terms of segment break-up, power products revenue was flat but EBIT grew 55% (YoY). Its powwr systems segment showed a 11% drop in revenue and EBIT was flat. Process automation revenue fell 2.4% and it turned around from a loss in previous year Q2. It is the other two sectors – discrete automation and motion and low voltage products which pulled down the numbers – both showing a sharp drop in revenue and EBIT.
Its order inflow fell 15% (YoY) at Rs.1731 crore and order book also dropped 10%. Both these factors show the pain in the sector and how things continue to look not-too-bright in the future. The company has a huge interest outgo which has also impacted the numbers apart from the macro economic environment. Its interest cost rose over 3 times (YoY) at Rs.26 crore and this was on account of increased short term borrowing for meeting higher working capital needs. Though the outlook as of now does not look too optimistic, the stock enjoys high investor fancy due to its Swiss parentage; as such MNCs quote a much higher fancy. The company, like the others in the sector is a victim of circumstances but fundamentally, remains solid. Number will improve once the economic macro environment improves.