Employees work on the outdoor units of split system air conditioners in Neemrana, Rajasthan, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Blue Star Expects Margin To Bounce Back In Fourth Quarter

Blue Star Ltd. expects margin to improve in the fourth quarter after the company cleared its old inventory by December, according to its Joint Managing Director B Thiagarajan.

The inventory liquidation was necessary as Blue Star was looking to re-engineer some of the existing products and launch some new ahead of the summer season, Thiagarajan told Bloombergquint, adding that despite the move, the company had a price hike of 4 percent. “The cost increase from March 31 last year to December...was close to 15 percent.”

The air conditioner maker posted a net loss of Rs 1 crore in the quarter ended December, compared with a profit of Rs 13.6 crore in the year-ago period. Its margin contracted by 60 basis points to 3.9 percent.

The results in the October-December quarter were hurt by one-time expenses and other headwinds such as the lukewarm festive season sales, custom duty hikes and the ongoing crisis in the non-banking financial industry, he said.

Assuming that the weather conditions become “favourable” in March, Thiagarajan expects marginal growth in profitability and a healthy revenue figure in the ongoing quarter. “The penetration level of cooling products is very low in India. All it's needed is three to four weeks of very hot summers to trigger the sales,” Thiagarajan said. “It's the onset of summers we have to look forward to.”

Q3 Results (YoY)

  • Revenue jumped 17.9 percent to Rs 1,099 crore
  • Net loss at Rs 1 crore versus net profit of Rs 13.6 crore
  • Ebitda remained flat at Rs 42.4 crore
  • Margin contracted to 3.9 percent, from 4.5 percent
  • Exceptional loss of Rs 7.2 crore was reported in the quarter, hurt by expenses incurred on Blue Star’s Platinum Jubilee celebrations.
  • Made provision for loss in ongoing joint venture in Oman for Rs 14.46 crore

Watch the full interview here: