In an interview to CNBC-TV18, Satish Bhat, MD of Ador Welding spoke about the Q1 results and outlook for the company.
Production and delivery got affected in the June quarter gone by because of certain repair work at the plant, Satish Bhat, Managing Director of Ador Welding told CNBC-TV18.
Bhat said much of the orders got pushed to September and December quarters, and the company has not lost out on any orders. As a result, the order book position is quite healthy, he said.
Below is the verbatim transcript of Satish Bhat’s interview to Reema Tendulkar.
Q: It seems like it has been a very challenging quarter for you. Did you face any impact on account of suspension of manufacturing facilities at your Chennai plant?
A: No, basically we have planned for this kind of outlook because we were aware about the performance during the quarter. Most of the projects which we have on hand, got postponed to quarter two and that was one of the major reasons. Coupled with that there were lot of planned repair which was carried out which has also affected the production and delivery in our consumable plant. So, it is not a worrisome situation. It was planned and we had planned for the profit. We have done better profit than the plan. Of course it is compared to the last Q1 on the lower side. But we will make it up for the loss in Q2 and coming quarters.
Q: You are saying that some of the orders which you were expecting in Q1 have gotten pushed into Q2 and that is the reason why this quarter has been very weak for you. Did you lose any of these orders or have all of them gotten pushed forward?
A: No, we did not lose any order. In fact most of our order booking position is very healthy and we expect these orders to be executed in quarter two. Therefore, we have good order book for Q2 and even for Q3.
Q: What will the growth rates look like in the next two quarters?
A: If you look at the total scenario in the country, we are expecting a gross domestic product (GDP) growth of about 7.5 to 7.75 percent and the increase in the growth is expected from the manufacturing sector. Our industry and our company are dependent heavily on the manufacturing sector. Since the growth is expected from manufacturing we are expecting to do much better than our performance in FY16 during FY17.
Q: The order booking was looking good for Q2 and Q3. What is the current order book?
A: We have got a very robust order booking and we can look at about Rs 50-60 crore of order booking which is on hand right now.
Q: Since you are quite confident that all the orders which were delayed will come to fruition in Q2. Have you started manufacturing at the Chennai plant?
A: Chennai plant manufacturing is on. We have not stopped the manufacturing. The only thing is that we have decreased the manufacturing. We have lowered the manufacturing at Chennai and we have consolidated at the other two plants basically for economies of scale.
Q: Once the revenues come back in Q2 how much will your margins bounce back from the current 3.1 percent, where could the margins be?
A: Last year we had margins of about 12 percent, earnings before interest, taxes, depreciation and amortisation (EBITDA) margins. We will continue to look at those levels of margins or better than that and that's our endeavour. It is in our DNA to improve the margins through product innovation, improvement in productivity, focus on cost, improvement in business processes and the manufacturing process. So, this quarter though the margins have gone down we are sure we will come back to the margins what we achieved last year and we will try to better than that.
Q: The Company is looking a diversification. You are looking at tapping into new segments. Take us through those plans and will it entail any capex?
A: We are totally dependent on manufacturing. If you look at our customer base; the customer base is from infrastructure industry, power industry, railway is important for us, oil and gas, automotive and defence.
In defence we have seen a lot of new things happening. We have also developed a couple of products for the application in defence. We have seen within defence navy is doing very well. They have a lot of projects on hand and we have developed products for them and those are approved. So, we expect good business from navy.
In terms of wind power, in power we have seen wind power is having growth maybe because of the government of India's push on the renewable energy and couple of new products required for the wind power and wind power equipments have been developed and we are seeing good growth and good demand for those products in the last quarter and expect to continue that in future.The Great Diwali Discount!
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