Bloomberg News

Suzlon Drops as Loss Widens on Taxes, Interest: Mumbai Mover

February 13, 2012

Feb. 13 (Bloomberg) -- Suzlon Energy Ltd., India’s biggest maker of wind turbines, fell the most in two weeks after reporting a wider-than-estimated loss in the third quarter as interest costs and provision for deferred taxes increased.

Suzlon shares fell 7.6 percent, the most since Jan. 30, to 28.45 rupees at the close in Mumbai. The benchmark Sensitive Index gained 0.1 percent.

The loss widened to 2.86 billion rupees ($58 million) in the three months ended Dec. 31 from 2.54 billion rupees a year earlier, the company said in a statement Feb. 11. That compares with the median estimate of a 625 million-rupee loss by six analysts in a Bloomberg survey.

The manufacturer, based in Pune, may be at risk of slowing orders in Europe, where it gets more than 50 percent of its contracts, Alchemy Share & Stock Brokers Pvt. said in a Feb. 2 note. Wind turbine makers are struggling with narrowing margins after reducing prices to compete for orders as U.S. and European governments cut clean-energy incentives to curb budget deficits.

Suzlon cut its forecast for full-year sales to as low as 210 billion rupees, according to the statement. Sales were 145 billion rupees in the first nine months. Third-quarter net sales rose 12.6 percent to 49.9 billion rupees. The company has orders worth $7.5 billion, it said.

“In spite of having our best-ever order book, we have had lower volumes” in the third quarter, Chairman Tulsi Tanti said in the statement. “As a group we are extremely well positioned in the global marketplace, and with our strong order backlog we expect to deliver nearly 40 percent growth in revenue in the next fiscal.”

Bond Redemption

The company’s auditors drew attention to the uncertainty about how Suzlon would raise funds to redeem foreign currency convertible bonds, according to the statement.

Suzlon has foreign currency convertible bonds with a total redemption value of about $569 million due in June and October, compared with the face value of $389 million, according to the statement. The yield on the zero coupon bonds due in June surged to a record 66.84 percent on Feb. 3, according to data compiled by Bloomberg.

“The management is actively pursuing various options, and given the several proposed plans of action, improving order inflows and overall business momentum, the management is confident that in case the FCCBs are required to be redeemed, it will be able to generate the required funds,” Suzlon said.

Suzlon also expects to collect funds from a customer it didn’t identify, working capital rationalization, sale of some “non-core assets,” and through fresh debt, the company said in an e-mailed response to questions yesterday.

“There is still uncertainty on redemptions after the quarterly earnings,” Raj Kothari, a London-based convertible debt trader at Sun Global Investments Ltd., said in a telephone interview today.

Deferred Tax

Suzlon’s taxes in the quarter rose more than fourfold to 1.34 billion rupees, while interest costs increased 21 percent, according to the statement. “International deferred tax liabilities” were at 1.21 billion rupees, the company said.

“The deferred tax liability is not a tax increase, it is a result of the difference in accounting norms between Suzlon Group and Suzlon’s German subsidiary Repower AG,” the company said in a separate statement, without elaborating.

Vestas Wind Systems A/S of Denmark, the biggest turbine maker, announced a loss in 2011 that was four times wider than expected on Feb. 8. Sinovel Wind Group Co., China’s biggest supplier, said Jan. 30 it expects 2011 earnings to fall by more than 50 percent.

--Editors: John Chacko, Indranil Ghosh

To contact the reporters on this story: Siddharth Philip in Mumbai at sphilip3@bloomberg.net; Anurag Joshi in Mumbai at ajoshi53@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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