After Welspun Corp posted a weak performance in the March quarter, BK Mishra, Chief Executive and Managing Director of the company said the company's earning should be read on an year-on-year basis. "Quarterly numbers present a different picture as compared to YoY numbers," Mishra told CNBC-TV18.
"Our total income from operations n FY16 is Rs 8,320 crore, down only 2 percent, while EBIDTA grew to Rs 1,034 crore, an on-year increase of 9 percent," he said. "Amid the situation in the oil and gas space, we are happy with the way we performed in the past year," he said.
The company had in a note said that in the second-half of FY16, turmoil in energy market affected its order book and margin profile. The company stands on a 900,000-tonne order book as of today, he said. "We would be able to maintain our performance. We would expect a flat revenue growth in FY17," he said.
Welspun's total income in the fourth quarter slipped 20 percent at Rs 1,841 crore against Rs 2,331.4 crore in the year-ago period. Its EBIDTA also dipped 59.6 percent in the quarter to Rs 157 crore. Net profit for the company stood at Rs 23.1 crore against Rs 143.8 crore in the corresponding period of FY15.
Below is the verbatim transcript of BK Mishra’s interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.
Mangalam: If you look at the numbers topline was down 20 percent the EBITDA was down 60 percent at the same time there was a statement coming in that the latter half of FY16 witnessed significant turmoil in the energy markets which has adversely affected the companies near term outlook. What is the near term outlook? A weak quarter this quarter can we expect this to turn around in the next year or next quarters?
A: First and foremost let me go back to the same statement that I have been actually making all these years that please treat us as a year-on-year (YoY) company. Now no doubt that if we really look at the quarterly numbers it gives you a very different perspective as compared to if you see a YoY number. If you see our total income from operation YoY this year is Rs 8,320 crore down only 2 percent actually. However, the reported EBITDA is up to Rs 1,034 crore YoY it is increase of 9 percent. Operating EBITDA is at Rs 911 crore as compared to 18 percent lower last year.
Profit before tax (PBT) has grown by 37 percent and the basic earnings per share (EPS) actually has gone to 8.63 as compared to 2.63. So, YoY if you see, amidst this kind of market situation in the oil and gas space, we are pretty happy with the way we have performed in the last year.
Reema: Could you elaborate a little more on the line that Mangalam was reading out that the turmoil in the energy market has adversely affected your near-term outlook and the margin profile of your order book. What was the margin profile, earlier how much has it come down to and what should we expect in the near term say in the next six months? Should we see revenues to continue to contract?
A: Again there is a dichotomy here. If you see my margin has actually increased as compared to last year by about 18 percent. If you ask me if I am going to perform exactly the same way coming next year and I would absolutely insulated from the debacle or like bad market conditions that is persisting in oil and gas sector? I would probably not be correct.
However, having said that we already stand at 9,00,000 tonne of order book while we speak today. So, it is almost you can say like 80-90 percent of what was my last year’s performance. So, we would expect that at least we would be able to maintain our performance.
Reema: So flat revenue growth is likely in FY17?
A: More or less that is what I would expect and unless of course the oil and gas space has been also changing so rapidly.
Reema: The visibility that you have right now is a flat revenue growth.
A: Yes, more or less.
Reema: What about this margin profile of your order book which is adversely impacted?
A: Since we have also gone into in current year we have performed exceedingly well in US. If you see my current order book, it is only about 12-15 percent from US. However, if you see from a marketing or markets spread perspective, 41 percent of my total production in India is going to be contributing for my next year business. So, all those things are going to affect but we would say that we would be performing moderately.
Mangalam: One thing that has been bearing down on the profits is the high finance cost because if we take a look at it almost a third of your EBITDA is eaten by the finance cost that we have? Look at the gross debt of the company has risen from Rs 3,000 crore odd to about Rs 35,000 crore what is the plan on management of your debt paring it going forward?
A: We have recently come out with our vision for 2020 and one of the main focus area is going to be managing our debt. We are actually targeting to bring down our net debt significantly.
Reema: How much?
A: Our target is that we could go down to probably like Rs 1,100 Rs 1,200 crore by 2020.
Mangalam: Where will that money come from because you are indicting your revenues will be absolutely flat and you have a lot of CAPEX lined up as well so how will you pare the debt where is the free cash going to come from?
A: We still made about Rs 600 crore this year. Even if we are managing the similar kind of performance we should be able to internally accrue to pay our debt.
Mangalam: You made Rs 600 crore this year but did not pay any debt out.
A: We did pay Rs 500 crore of debt and net debt has increased primarily because of working capital and that is also due to the fact that I think in one of our geographical location the payment which was outstanding and which we expected to get it probably before closer of the year it came probably few weeks later.
Reema: So, you have got it now?
Reema: Next year say when we are talking 12 months later and we are discussing FY17 numbers how much would your net debt come down from Rs 2,024 crore?
A: It is again an aspirational. We would look at atleast bringing it down by about Rs 300 to 400 crore.