Thermax’ sales growth helps overcome margin drop

Engineering company Thermax reported its June quarter results on Friday. Its results, which was for the first quarter of fiscal 2011-12, were better than expectations. Its share price rose by 2%, while the market was up by 1.6%.


The company’s orders on hand at the end of the June quarter were Rs 5,889 crore, down by 7% over a year ago, but 5% higher over the March quarter.
Thermax’ standalone revenues rose by 32% to Rs 1,033 crore, indicating healthy order execution. Though orders may have declined, revenues depend on execution levels, as an engineering company can book revenues based on the level of project completion. Slower order growth in recent times may result in slower growth in future.
The company said that its Indian business is facing pressures from rising interest rates, rising input costs, fuel availability and land acquisition-related issues. Thermax order books depends on projects achieving financial closure as that will allow them to start placing orders.
Rising material costs is a worry –as metal and fuel prices turn expensive- and they rose by 39%, faster than sales did. But expenses such as salaries and other expenses rose at about 20% levels. That allowed Thermax to post a 21% growth in its net profit during the quarter.
The company had acquired the Danstoker group in November 2010, so its consolidated results have become more relevant. But year on year comparison will have to wait till the December quarter ends. The net profit margin of the consolidated entity is about 7%, a little below the 7.6% attained by the standalone entity.
In Rs Crore, except where mentioned otherwise

Read the press release from Thermax here and get the financial results table here.

Comments are closed.