- Orders at 60% of Q1 2020 inspite of COVID-19 pandemic and restricted business activity
- Digital and remote service technologies deployed to enable customer connectivity and business continuity during the lockdown
- Cost optimization measures implemented
- PAT and operational EBITA sharply impacted by the pandemic
- Long-term growth drivers intact; order backlog at INR 5,134 crore
The COVID-19 pandemic weighed heavily on the business of Hitachi ABB Power Grids India (listed on the stock exchanges as “ABB Power Products and Systems India Ltd.”) in Q2. While we won a large rail order, short-cycle demand plummetted and system installation and service activities faced mobility restrictions impacting adversely orders and revenues. Intensive cost mitigation efforts provided marginal support. Amidst the tough situation, employee and customer safety, as well as business continuity remained our top priorities.
In accordance with the nationwide lockdown, our shop floors, project sites and offices were shut for more than 30 days. Transport disruption, travel bans, quarantines, social distancing and various other curtailment measures impacted business negatively. We resumed operations end of April as per the Ministry of Home Affair’s directives in a staggered manner, with safety guidelines. However, the disarray in supply chain continued and big-ticket projects were impacted by the mass exodus of migrant workers.
To ensure business continuity for customers, we commissioned some projects remotely, and executed remote factory acceptance tests (R-FATs) – for customers who were so inclined – to stay on track as much as possible with project timelines. We conducted numerous technical webinars, attended by several hundred customers virtually, on technologies that can aid a greener and sustainable post-COVID-19 economic recovery.
“In these unprecedented times we have maintained business continuity while keeping our employees safe. It says much that despite the COVID-19 pandemic, and the lockdowns triggered in its aftermath, we won major orders and strengthened customer relations thanks to our dedicated employees,” said N Venu, Managing Director, Hitachi ABB Power Grids India. “Once market normalizes, we are hopeful of opportunities that allow us to build back better and lend greater speed to India’s economic growth and energy transition,” he added.
Despite the COVID-19 outbreak and tight economic conditions, orders April-June 2020 stood at INR 567 crores, or 60 percent of Q1, with transport and infrastructure accounting for most, followed by utilities. Among our major wins was a transformers order from Chittaranjan Locomotive Works toward the Indian Railways.
Our efforts in exports continued to bear fruit. Amidst tough market conditions, replete with trade uncertainties, we booked orders from the sub-continent, South East Asia and Africa, especially for our high-voltage equipment and transformers. Our service portfolio continued to deliver with multiple cybersecurity assessment and lifecycle service orders for grid automation and high-voltage breakers and several digital upgrade, retrofitting and remote servicing contracts from traditional and new customers.
In addition, we signed a memorandum of understanding with the National Institute of Technology, Warangal, for cooperation to drive smart electric grid technology education, skills development and research activities, as well as made further headway into the e-mobility segment with the global launch of our Grid-eMotion fleet charging solution. This offering holds potential to fast-track India’s mission to decarbonize its transport sector.
As of June 30, 2020, our order backlog was INR 5,133.9 crore, indicating future revenue inflow for when normalcy returns.
Revenue and operations
Despite the best of efforts, we had an estimated revenue impact of approx. INR 400 crore in Q2 vis-à-vis Q1 due to the lockdown. That reduced our turnover to INR 634.3 crore in the quarter under review.
Factories remained shut for most part of April, while supply chain was heavily impacted. Collections dipped and payouts increased. Operational resilience and effective use of digital technologies helped preserve business continuity. Our top focus remained the safety of our employees and customers, while we worked to mitigate the impact of the crisis, work toward better liquidity and cash position.
Our profit before tax, before exceptional item, in the second quarter was INR 14.9 crore, profit after tax was INR 10.9 crore, both hampered by the revenue shortfall. Operational EBITA was at INR 3.9 crore.
On July 1, 2020, Hitachi Ltd. and ABB Ltd announced the formation of Hitachi ABB Power Grids Ltd. Hitachi has an 80.1 percent stake in this global joint venture carrying out the power grids business and ABB holds the balance. The joint venture brings together two highly respected companies to create a global power leader. The joint venture with Hitachi will facilitate expansion opportunities for the power grids business in areas such as mobility, industry and energy storage, besides providing financial muscle to support ambitious projects and enabling access to Japan, the third largest economy in the world. By leveraging capabilities in digital platforms, combined with our energy platform and with a focus on intelligent grids, Hitachi ABB Power Grids will enable customers to increase resilience and efficiency, and unlock new business models.