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Elecon Engineering: Poor start to the year - Views on News from Equitymaster
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Elecon Engineering: Poor start to the year
Aug 23, 2013

Elecon Engineering has announced first quarter results of financial year 2013-2014 (1QFY14). The company has reported a 41.9% QoQ decline in sales while net profits have declined by 70.8% QoQ during the quarter. Here is our analysis of the results.

Performance summary
  • Total income declined by 41.9% QoQ in 1QFY14. It may be noted that under a scheme of arrangement, Elecon Engineering had decided to sell its material handling equipments (MHE) business by the way of slump sale to Elecon EPC Projects Ltd, a subsidiary of the company. The scheme of arrangement was effective from 01 April 2013. As such, the current quarter financial results reflect the operations of Transmission Equipments (TE) business only. Hence, YoY performance is not comparable since 1QFY13 results include the performance of MHE business. Thus, we have analyzed the 1QFY14 performance on QoQ basis. It may be noted that 4QFY13 results exclude the performance of MHE segment thus enabling a like to like comparison on QoQ basis.
  • Operating profits decline by 28.7% QoQ during the quarter due to muted performance at the topline level.
  • Net profits decline by 70.8% QoQ due to weak performance at the operating level. However, increase in other income by 127.8% QoQ cushioned profits to an extent.
  • The order backlog as of 31st July 2013 stood at Rs 2.5 bn. This reflects backlog of the TE segment only as MHE segment has been transferred to the subsidiary. During the period until July 2013, the company received orders worth Rs 2.26 bn pertaining to the TE segment.

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