The Hindu Business Line : High shipping cost sinks Suzlon net in Q2

Global wind turbine major, Suzlon Energy Ltd has hit an air pocket. Net profit for the second quarter dipped 95 per cent, due to currency fluctuations, higher freight cost and compensation to the US customers for the rotor blades failure.

For the quarter the company achieved a net profit of Rs 17 crore, compared with Rs 355 crore profit in the corresponding year-ago period. Net sales for the quarter grew 32 per cent at Rs 2,234 crore (Rs 1,687 crore).

Talking to the newspersons on Friday, Mr Tulsi Tanti, Chairman and Managing Director, Suzlon, said that the profit for the quarter took a major hit due to high shipping cost. The business requires special large ships for transporting the turbines but demand for such ships had gone up.

The oil industry had driven up the demand in the quarter; availability of such ships had reduced. Freight charges had also increased due to hike in oil prices, which resulted in higher operational cost. The EBIDTA, margin which was 14 per cent in the first quarter, declined to 10.3 per cent in the second quarter, he said.

Mr Tanti said that at the end of the quarter the mark-to-market losses in foreign exchange forward/option contracts was Rs 32 crore, and for the half year it was Rs 90 crore. The company has made a currency loss of Rs 197 crore after restating its liability on convertible bonds.

The profits have also been affected due to performance guarantee to the customers for the rotor blades faults in the first and second quarters, he said.

“All our turbines carry two year guarantee and warranty, and in addition, if we are operating and maintaining the machines for our customers, then we have to give 95 per cent uptime guarantee. Some of the turbines developed cracks, and therefore, we are compensating for the energy loss due to the down time. For the quarter, we have paid Rs 48 crore as performance commitment,” Mr Tanti said.

He said that Suzlon’s SEZ has become operational in the second quarter, therefore, all the operational cost have been carried in the quarter without any production. SEZ fixed cost has increased while production will only start in the third and fourth quarter, he said.

“Our capex plans are on track for the addition of 3,000 MW of new capacity. Originally we had planned an Rs 1,500-crore capex, but we had to drop the investment in tower manufacturing facilities due to easy availability of towers in the local markets, thus, reducing our capex by Rs 669 crore.

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