Satisfied by execution in Q2, but orders still lagging: ABB

ABB India expects to do better than the industry this fiscal despite challenging market conditions, says Bazmi Husain, MD of the company.Speaking to CNBC-TV18, he says: “There is a growing and widening gap between the sentiment and actual action on ground and if you look at capacity utilization, it is at an all time low, the credit is all time low; so, it is a reflection of the market that our customers are not really willing to spend money on new projects.”Below is the transcript of Bazmi Husain's interview with Mangalam Maloo and Reema Tendulkar on CNBC-TV18. Reema: Fist could you tell us a little more about your order inflows, now that has declined nearly six percent on a year-on-year (Y-o-Y) basis, what was the reason for that and also if you could tell us how many orders have you executed in this quarter?A: If you look at Q2 from an execution perspective, it has been a very satisfactory quarter. However, from a market perspective, the activity in the market as far as new projects or new orders are concerned continues to be very challenging environment. There is a growing and widening gap between the sentiment and actual action on the ground and if you look at capacity utilization, it is at an all time low, the credit is all time low, so it is a reflection on the market that our customers are not really willing to spend money on new projects.Mangalam: Your margins have improved due to indigenisation and other initiatives that the company has taken from about 3.9 percent a couple of years ago to 8 percent so do you see these doubling of margins as one sustainable which we have seen over the last three quarters? Do you see this as peaking? Do you expect them to get better from here or this is the top?A: This is not a one quarter effect as for more than four quarters we have been consistently improving our margins. We have been telling in detail about what actuals are resulting in this margin improvement so we see that sustainable.As far as growth is concerned, we are waiting for the market to turnaround. The market turnarounds, then the volumes pick up. Clearly the potential to do better and potential to do more exists.Reema: So considering the challenging environment, it is quite likely that growth for FY16 will be in single digits?A: The rule, we do not talk about future and predict that but what we will say is that we will grow and grow better than the market. Mangalam: Could you then give us a sense of what has been wrong with the power systems and power automation segments of the company because we have seen the topline or the sales on that one declining, even the margins on that have been falling off?A: The two are related. If you take power systems, you are dealing with a lot of customers, it is a very stressed balance sheet and for the last several quarters, several years actually we have a mantra of saying that we will put cash over revenue, so this quarter alone we had in excess of about a Rs 150 crore that we held back–where the equipment and everything was ready, that we held back and did not ship out because the payment mechanisms that were there according to contracts were not in place. So, it is clearly that this is not reflecting any basic or fundamental weakness in the system.