Revenue from operations for the quarter ended June 2016 stood lower by 1% to Rs 90.1 crore with exports account for 17.6% of it.

The revenue of industrial switchgear (IS) register a growth of 3.5%yoy in Q1FY17 and that of copper business up by 36%yoy. The building segment revenue was down by 7.1% to Rs 3.4 crore compared to Rs 3.7 crore in the corresponding previous period. So the fall in overall revenue is largely on account of Energy Management (EM) business. The revenue of EM business was down by 87.8% to Rs 1.9 crore compared to Rs 15.6 crore in the corresponding previous period. Sharp fall in revenue of EM business, which is largely an order driven business, is due to booking of revenue of one large order in Q1FY16, the corresponding previous period. The company won an order of Rs 106 crore, and as per the terms of the order, a major part of the revenue was booked in FY16 and the balance is spread equally in four years. In line with this, the company booked a revenue of Rs 1.9 crore and a PAT of Rs 0.05 crore in Q1FY17 as against a revenue and PAT of Rs 15.9 crore and Rs 1.9 crore in the corresponding previous period.

The contribution of Industrial Switchgear business to topline was about 46% in Q1FY17 with that of Buildings Products business stand at 3.8%; Copper business at 48.1% and Energy Management business stand at 2%.

Biggest contributor to Q1FY17 revenues are L&T 38%, Sneider 7.8%, GE 3.5%. The share of L&T to topline increased this quarter and that is largely due to growth in wires and cables business.

Expects sale to register a growth of about 20-25% in FY17. If current business mix continues the EBITDA margin will improve by 1% points to 13%. If the sales mix changes in favour of IS biz with new products start contributing there will be an additional 0.5%-1% point increase in EBITDA margin taking it to about 13-14%.

There is no change in strategy of the company. The expected change in mix is to happen with IS business outgrow the wire & cable business (ie. copper business). But the IS business is not growing at the rate the company expected but the copper business grow at a faster rate with better margin in Q1FY17. EBITDA margin of this wire and cable business expanded from 7.6% to 8.6% in Q1FY17.

Strong growth from wire and cable business is largely due to new products. The company developed Elevator cables and outdoor cranes cables which has witnessed strong demand.

In Q1FY17 the copper business registered a volume growth of 30%. In case of Industrial switchgears the entire about 4% growth came due to volume growth.

The company expects the contribution of copper business to sales will range about 45-48% for current fiscal.

The project to manufacture Three Phase Dry Type transformers in Technical Tie-up with Trafomodern is coming up very well. The machinery installation is currently going on and the trial production is expected to commence by mid of September 2016. The company expects revenues from this project to start from Q3FY17. Similarly the contribution from another new product i.e. Capacitors will start from mid of Q4FY17. However the project on Matching Relay is going slow.

The Company has successfully shipped its first order for IPD in Australia. The Company is confident of growing this business and increasing revenue contribution from this new client. The tie up between the company and IPD is currently for one product. The company shipped products worth RS 1.65 crore in Q1FY17. Expects revenue of about Rs 10-12 crore from Australia market this fiscal. The company is similarly working on for tie-ups with various players for various other geographies.

Energy management – From on-going contract the company expects revenue of Rs 10-12 crore for next four year. The company expects strong flow of similar kind of new orders as it has participated in large number of tenders which are expected to get finalized by Q3FY17. So the company expects Rs 20-30 crore business by end of this fiscal.

Typically Q1 will be a flat quarter and Q4 is a good quarter. The demand seen in Q1FY17 is different and it is slowing down. Optimism in private sector is subdued and the investment in the country is largely driven only by government. So this makes the market more challenging.

Salzer is multiple product company catering to multiple industries. When the economy is subdued the company will register marginal to flat growth but when the economy rebound it will grow at a faster pace than the economy.

Going forward, it will continue to focus on adding new, niche and high margin products, enter new geography and offer total and customized electrical solutions to our existing and new customers.