Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orders and revenues grew by 13%, indicating strong market momentum.
- Profit after tax expanded by 50% due to revenue mix and superior order execution.
- Operational EBITDA increased by 64% for the quarter.
- Export orders grew by 39%, showing strong international demand.
- The company remains debt-free with a strong cash balance of INR 4,872 crores.
Negative Points
- Base orders were slightly weaker in the first half, partly due to election and budget delays.
- Revenue growth was impacted by a delay in project schedules and customer decisions.
- Employee costs and other expenses grew at a higher rate than sales growth.
- Material cost advantages due to commodity price stabilization may thin down in the future.
- The building sector faced challenges, with a reported market de-growth of 18% in residential apartments.
Q & A Highlights
Q: Base orders were slightly weaker in the first half. Are you seeing an increase in inquiry levels post-election?
A: Sanjeev Sharma (Managing Director, Executive Director) - The election and budget period caused a slowdown, but we expect a steady growth path across heavy industry, light industry, transport, and infrastructure. The underlying strength of the Indian market remains strong.
Q: Is ABB India gaining more market share compared to group companies for Indian orders?
A: T. Sridhar (Chief Financial Officer, Chief Investor Relations Officer) - We haven't established a direct correlation. Our focus is on the India numbers, which are more predictable and reflective of our direct market exposure.
Q: How sustainable are the higher EBITDA margins compared to the parent company?
A: Sanjeev Sharma (Managing Director, Executive Director) - The higher margins are due to a combination of factors including operational efficiencies, higher quality orders, and a supportive market. The focus on stability, profitability, and growth has been key.
Q: What is the mix of base orders and large orders in the order book?
A: T. Sridhar (Chief Financial Officer, Chief Investor Relations Officer) - Approximately 40-45% of the order backlog consists of long-cycle and project orders, which are executed over 15-18 months. The remaining 55-60% are short-cycle orders executed over 6-9 months.
Q: Can you provide more details on the superior pricing power and sales mix?
A: T. Sridhar (Chief Financial Officer, Chief Investor Relations Officer) - The major contributor to improved margins is the reduction in material costs, achieved through a combination of external market factors and internal operational efficiencies.
Q: What percentage of Motor sales comes from IE3 and IE4 motors?
A: Sanjeev Arora (President, Motion) - More than half of our production, roughly 52-53%, consists of IE3 and IE4 motors, even though the country norm is still at IE2.
Q: What are the plans for capacity creation in the next 3-5 years?
A: Sanjeev Sharma (Managing Director, Executive Director) - We are focusing on incremental expansions and productivity improvements. We have announced new facilities in Bangalore and are continuously upgrading our plants in Nashik, Vadodara, and Faridabad.
Q: How does the new management's strategy compare to the previous CEO's?
A: Sanjeev Sharma (Managing Director, Executive Director) - The new CEO, Morten Wierod, has a mandate for growth while maintaining profitability. He is familiar with India and supports our growth strategy.
Q: What percentage of your backlog is fixed-price contracts?
A: T. Sridhar (Chief Financial Officer, Chief Investor Relations Officer) - About 40-45% of the backlog consists of long-cycle orders with price variation mechanisms. The remaining 55-60% are short-cycle orders, mostly fixed-price contracts.
Q: How much of the margin benefit is due to commodity stability or deflation?
A: T. Sridhar (Chief Financial Officer, Chief Investor Relations Officer) - The margin expansion is partly due to higher prices at the time of order booking and stable or deflating commodity prices at the time of execution.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
