Va Tech Wabag

Rajiv Mittal, MD & S Varadarajan, ED addr the call.Highlights by Capital Mkt
For the quarter ended September 2015, Va Tech Wabag reported a 19% rise its consolidated sales to Rs 602.46 crore. OPM crashed from 6.8% to 7.7% which pulled OP up 34% to Rs 46.50 crore.PBT grew 33% to Rs 30.33 crore and net profit fell 6% to Rs 14.63 crore.For six months ended September 2015, Va Tech Wabag reported a 17% rise its consolidated sales to Rs 1058.97 crore. OPM fell from 6.5% to 5.5% which pulled OP down 1% to Rs 58.57 crore.PBT fell 22% to Rs 30.12 crore and net profit dived 82% to Rs 4.75 crore.
The company’s strategy to grow in diversified grographies has enabled it to deliver consistent order intake notwithstanding the muted progress in the Indian market.Order intake stood at over R. 3080.40 crore.Order Book stood at Rs 8617.70 crore & Framework Contracts of Rs 1540 crore.Thanks to its healthy order backlog it was able to fast track execution in India market amidst tight liquidity situation in the market by supporting sub-contractors and suppliers.
The company has total order backlog of Rs 8600 crore including Framework Contracts of Rs 1500 crore. Order backlog provides visibility for 3 years.
Good opening backlog and increased focus on project execution has resulted in growth of sales and EBITDA.The company incurred increased cost of sales to extent of Rs 5 crore due to extended stay at site in the Oman desal project and in general mix of projects for the quarter.
The company has classified the site employee cost for Istanbul O&M Project in Turkey under Cost of Sales in September 2015 quarter and accordingly aligned the numbers of prior period.
Overall, overheads in general were tightly controlled
Euro depreciation of 12%, delay in Nepal project due to local conditions, Oman project nearing completion, many overseas projects being under engineering completion contributed to drop in overseas revenue in September 2015 quarter.Cost of sales vary from quarter to quarter depending on the mix of projects.Tight control of overheads has led to reduction in TCO and higher EBIDTA.There was also reduction in provision for receivables.Interest cost grew 76% to Rs 10.87 crore. Increase in finance cost was largely due to increase in Interest charges on account of Ujams BOOT Project in Namibia (was IDC during prior period) and reduction in interest income.
The management feels that Africa and South East Asia are largely untapped- emerging economies and the company can have competitive edge through Indian support.In Middle East the company has >50% of Desal market in Saudi. This market has high potential for advanced technologies.In Europe, the company has over 100 patents in its R&D Centre. Its setup in Europe acts as references for global business.
Exchange rate for balance sheet used for Sep 15 of 74.45 had 10% increase over FY Mar 15 of 67.93 rate.Current liabilities grew 10% to Rs 1486.5 crore due to increase in short term borrowings for working capital.The company took 6 Projects to completion during the first half.
The company now has a separate team for project closure which leads to focused attention on closing projects.The company resorted to use its cash in Balance Sheet for Speedier execution as sub-contractors and vendors face tight liquidity market situation.
One of the key orders received in September 2015 quarter was order from Petronas RAPID ETP, Malaysia worth Rs 1534.50 crore. This is the biggest ever order secured by the company. This gives immense confidence to the company as it secured the order in competition with established foreign players. This order proves the company’s technology superiority in providing large complex projects in overseas. 70% of this order book is with the company and the rest is with the JV partner.During the quarter the company also won new orders in the O&M space and advanced technology order in Switzerland for a modern biological membrane.Organization realignment is aimed to gear up its human capital towards achieving its target of becoming 1 billion Euro group.Networking capital excluding cash stood at 59 days of sales.Government is working fast towards its commitment of smart cities, Swach Bharat and Namami Ganga. In coming years, the company expects strong orders from the Indian geography.
Guidance range for FY 16 revenue is Rs 2800 crore – Rs 3000 crore & Order Intake guidance range is Rs 3500 crore – Rs 3700 crore