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Elecon Engineering: MHE unit sale impacts profits - Views on News from Equitymaster

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Elecon Engineering: MHE unit sale impacts profits
Jun 4, 2013

Elecon Engineering has announced fourth quarter and full year results of financial year 2012-2013 (4QFY13). The company has reported a 59% YoY decline in sales while net profits have declined by 53.3% YoY during the quarter. Here is our analysis of the results.

Performance Summary
  • Total income declined by 59% YoY in 4QFY13. However, it may be noted that the current quarter's standalone performance is not directly comparable with the previous year figures. Under a scheme of arrangement the company had decided to sell its material handling equipments (MHE) business by the way of slump (entire unit) sale to Elecon EPC Projects Ltd, a subsidiary of the company. It may be noted that the current scheme of arrangement is effective from 01 April 2013. However, the due effect of the scheme has been given in the last quarter results. As such, the current quarter standalone performance does not include performance of MHE division since it has been sold to a subsidiary. Thus, prior period performance is not comparable. Revenues from the transmission equipment business increased 17.7% YoY during the quarter.
  • Operating profits decline by 61.4% YoY during the quarter due to a muted performance at the topline level.
  • Net profits decline by 53.3% YoY due to weak performance at the operating level. For the full year, profits were down by 87.8% YoY. However, the full year profits were impacted by an exceptional loss of Rs 267 m arising from sale of MHE undertaking.
  • The order backlog as of 31 March 2013 stood at Rs 2.06 bn. This reflects backlog of the TE segment only as MHE segment has been transferred to the subsidiary. During the quarter the company received orders worth Rs 5.1 bn pertaining to the TE segment.
  • The board has recommended a dividend of Rs 1 per equity share.
  • The standalone debt/equity ratio of the company stood at 0.44x

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