Feb 27, 2013 08:20 AM IST | Source: CNBC-TV18

Margins stable; hope Budget focus on infra bottlenecks: ABB

Bazmi Husain, country manager and MD, ABB says that the year 2012 has been a challenging period for the company with margins starting to stabilise only in Q4

Bazmi Husain, country manager and MD, ABB says that the year 2012 has been a challenging period for the company with margins starting to stabilise only in Q4. The company is executing a cash-over-revenue policy to ensure cash flows, he adds.

"I expect the next two quarters to remain challenging for infrastructure industry and hope to see increased focus on the renewable sector and on SEB restructuring in the Budget."

Below is the edited transcript of the interview on CNBC-TV18

Q: The shareholders are concerned about the company's 3-3.5 percent margins. By when do you expect a meaningful recovery?

A: This has been a very challenging year, especially in the last two quarters. Overall, while there has been a dip in the orders, revenues are flat and margins are down. A breakdown of the components reveals a very different picture. On the product side of the business, margins are stabilising and starting to rise. In the last quarter, the trend was similar in power products, in discrete automation and motion.

Our project business has started to offer challenges due to prolonged delays in implementation. Our conservative accounting policy reveals a mixed bag caused not due to cost overruns but delays in infrastructure projects.

Q: Beside project-delays, are you facing any delays in receiving payment for projects already executed?

A: The market environment is such that participants are holding back on new projects or even existing projects because of the delay in implementation across the infrastructure sector. Our policy right now regarding execution focuses on cash over revenue and last quarter alone we held back over a USD 100 million worth of shipments because we were not sure about the payment from the customers.

So, we are addressing the issue by following and enforcing tighter terms, and focus on the short-term and product business.

Q: What is your outlook about growth or guidance for the industrial and project businesses over the next few quarters?

A: All the underlying factors required for growth continue to exist. Industry is  suffering from a paralysis that requires acceleration of the reform measures announced by the government.

Q: What is the revenue and profit you expect in FY14 given the tough economic conditions?

A: With so many variables at work, it is difficult to estimate when there will be an improvement and I don’t think the problem is so severe. I think it is more a matter of taking decisions. Even if the Budget promotes growth, the next two quarters will continue to be very challenging.

Q: What are the positive signs that you expect from the Budget that would improve the speedy implementation of projects?

A: I expect the Budget to address the entire gamut of issues such as power generation, the land acquisition and re-structuring of discoms, to promote growth.

I also expect incentivisation of renewal energy and the focus on energy efficiency that will drive investments in the power sector along with increased regulation.

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