Hope to get back to 8% margin this year: ITD Cementation

The weaker-than-expected earnings posted by ITD Cementation in the second quarter is due to recognition of loss in share of joint venture of about Rs 22.4 crore compared to Rs 4 crore profit in same quarter last year, said CFO S Ramnath in an interview to CNBC-TV18.  

Ramnath said the company hopes to get back to annualised margin of around 8 percent this year.Below is the verbatim transcript of S Ramnath's interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Anuj: What went wrong in the quarter?A: I have been communication to the investors through your channel that in an industry like us, construction industry, one should not look at results quarter on quarter (QoQ). Traditionally, June quarter that is Q2 for us -- our accounting year is January to December -- so June and September quarters are normally the quarters which are lower and March and December quarters are the highest, almost 60 percent of our revenues come in those two quarters. June and September are lower in terms of execution of projects.Having said that, there are couple of reasons have contributed and this is not something which is going to be continuing. Our margins at this quarter are lower for the reason that our overall revenues consolidated in this quarter has been 15 percent lower than the March revenues.Latha: What Anuj Singhal was pointing out was year on year (YoY) comparisons. If Q2 is seasonally weak, it should have been seasonally weak last year as well but you are down on an EBITDA level year on year. We are not even comparing QoQ.A: Because of different types of projects. Now there are specific reasons for our margins -- if you see our results, in this quarter we have recognized a loss on our share in the joint venture (JV) of Rs 22.4 crore which in the previous year's quarter was 4 crore profit.As I have been explaining earlier, this year we have been facing certain execution challenges on some metro projects that are under completion. That should get over by this year. That I have been communicating. So if you take away that, which is probably getting wind down, the projects are getting over now, only about Rs 70-80 crore of work remains.Latha: Can you repeat that loss figure?A: Rs 22.4 crore is the downside on the joint ventures that we have taken in this quarter against a profit of 4 crore.Sonia: You were telling us about the execution challenges on metro projects that has impacted your margins, once the situation gets resolved then what kind of margins do you see over the next two quarters?A: Q2 will be muted because of monsoon but the last quarter will be very good, we will be able to recover most of it and the projects will get over. The higher margins in better projects will contribute more in the last quarter.Sonia: When you say recover, what do you mean? Will it get back to 7-8 percent margins by the last quarter, by Q4 of calendar year?A: On an annualised basis, we are looking at 8 percent margin for the whole year this year.Latha: Have you all started that metro line 3 execution?A: We are in the process of starting and other things are happening and next year onwards we would come to normal margins. I don’t think there is any need for any knee-jerk reaction. Investors most of them understand the business in our industry.