52-week flop: Voltas :: Business Line

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Falling revenues in the cooling and the electromechanical projects segment and margin pressure on increased competition in these segments saw the stock of Voltas plunging by over 60 per cent in the last one year. For the first half of FY-12, the company's sales dropped 0.8 per cent and operating profit fell by 51 per cent.

The electro-mechanical projects (EMP) segment which contributes 55 per cent to overall revenues of Voltas saw a five percent increase in revenues in the six months ending September 2011. However, profit at the operating level plunged 76 per cent on an eight percentage point decline in margins due to cost overruns at its projects in Qatar.

There is stiff competition between EMP players in West Asia. Going ahead too, there is expectation of margin pressures and slower order flows. The unitary cooling products business which gives the company an exposure to consumer business has also put up a dismal performance in the last few quarters. For the six months of FY-12, the segment reported a six per cent drop in sales and a 23 per cent drop in profits.

Profits margins came under pressure as the company had to liquidate the inventory in the warehouse by offering discounts. Extended winter in the North and the resultant drop in demand saw inventory accumulation.