Will stick with FY17 guidance despite poor Q1: Astra Micro

Manufacturers of microwave systems defense, space and telecom Astra Microwave reported a weak set of first quarter numbers where the revenue fell 42.9 percent to Rs 56.8 percent year-on-year and net loss stood at Rs 2.4 crore against a profit of Rs 4.9 crore in the same quarter last fiscal.

B Malla Reddy, MD of Astra Micro said that it is common in this line of business to face a few hurdles when a new project is transferred for production which led to the disappointing set of numbers.

In an interview with CNBC-TV18, he said that the company will not change its revenue and profit guidance for FY17 and sticks with the orderbook guidance of Rs 530 crore.Below is the transcript of B Malla Reddy’s interview to Latha Venkatesh, Anuj Singhal and Sonia Shenoy on CNBC-TV18. Latha: The total income was down 43 percent, earnings before interest, taxes, depreciation and amortisation (EBITDA) was down hugely. From Rs 13 crore, it has fallen to Rs 2.5 crore and the margins also have crashed, so the company posted a net loss of Rs 2.4 crore versus profit a year ago. What went so wrong? A: Two products which have gone into production very recently, they had some issues and they did not deliver the expected revenues in the first quarter. But the issues are now resolved and they are going smooth now starting from July. These kind of things is very common for us. Of course, for the market it may surprising, we have been experiencing these kinds of things for last 25 years of our existence. Whenever new product is transferred to production, there will be some hiccups at the time of initial production runs. Anuj: Was this just a one-time execution issue and do you think Q2 to Q4, you will do enough to make up for Q1 and what is the outlook then, for the full financial year compared to last year? A: Whatever we have given the guidelines, that we are not changing. We will still continue to share the same guidelines for the year, Rs 450 crore revenue we have committed and some Rs 60 crore plus profit margin, we are continuing with the same guidelines. Sonia: So, what is the order book currently and what is the order book guidance for FY17? Would you stick to that as well? A: Yes, we will. No changes. Sonia: So, it stands at Rs 530 crore itself? A: Yes. Latha: Just to take my colleagues point forward. If you have guided for Rs 450 crore, as you say, you are standing by it, you have done barely Rs 55 crore in the first quarter. You will have to do Rs 130 crore every quarter. That is doable? A: In fact, if you see in our last 10 years balance sheet, last quarter we have done almost half of the year’s turnover in some of the years. We have gone through that kind of thing and it is common in our business line. Nothing to worry. And in fact, we are planning to do nearly about Rs 150 crore in the last quarter. Latha: Why did the margins crash so much. I can understand your revenue being lower, but margins compared to Rs 13.5 is Rs 4.5 crore. A: When my turnover comes down drastically, my contribution comes down. So, when future cost remains same, then if you calculate the percentage, they will go down. Sonia: So, what about the export markets? What is the current share from the export markets and are you facing any kind of pressure there? A: The export market, as we have told you earlier, we have just about Rs 45 crore of orders which we will be starting delivering sometime this quarter end. And we will be completing in two quarters.