Suzlon scales down forecast

Suzlon Energy, the world’s third-largest wind turbine supplier, has scaled down its sales forecast for the current year to 1,900-2,100 megawatts (Mw) from the 2,400-2,600 Mw guidance given earlier, owing to delay in execution of orders.

The troubled wind energy major has also embarked upon a cost control and operational improvement initiative under ‘Project ACE’ (Achieving Collective Excellence) to get out of losses and mounting debts.

Suzlon, which had to rectify rotor blades of its entire V2 type S88–2.1 Mw turbine fleet owing to manufacturing defects, had posted a Rs 355.5 crore loss for the third quarter ended September, against a loss of Rs 22.8 crore in the previous year’s corresponding quarter.

For the first six months of the current financial year, Suzlon’s losses were Rs 808 crore. Consolidated revenue for the quarter also shrank by 44.4 per cent to Rs 4,793 crore, against Rs 6,921 crore in the corresponding previous year quarter.

“During the first half of 2009-10, conversion of booked orders to revenue showed some slowing down. Potential new orders were postponed, owing to the weak global macroeconomic and financing environment,” said Sumant Sinha, chief operating officer.

Suzlon alone has an orderbook of 1,488 Mw worth Rs 8,285 crore, with 1,365 Mw in international orders and 123 Mw in domestic orders. Its German subsidiary REpower reported a contractually confirmed order volume of ¤1.6 billion, as on September 30, 2009.

Sumant Sinha said sales may be skewed towards the end of the financial year. The market conditions remain challenging in the short-term, but long-term outlook remains positive, as policy changes in key markets give strong impetus for growth.

“We are starting to see a recovery across global markets with finance returning. New energy policies and stimulus packages in the EU, US, China, Australia, India and emerging markets, indicate rising acceptance of the challenges of climate change and a growing appetite for renewable energy solutions,” said Tulsi Tanti, chairman and managing director.

Suzlon said the company had appointed Boston Consulting Group (BCG) to advise on business strategies to adapt to evolving marketplace and to have a strong focus on operational efficiency improvements.

The company, sitting on a debt of over Rs 11,000 crore, mainly owing to acquisitions of REpower and Hansen, has launched Project ACE, a comprehensive exercise assisted by BCG, aimed at optimising operational efficiencies and to achieve excellence across our value chain.

“We have mapped more than 100 processes, and have identified 12 critical processes with improvements across several operating parameters. Phase-I of this initiative is complete and Phase-II is underway,” said a Suzlon press release.

Sinha said Suzlon was undertaking a series of cost and operational improvement initiatives. “We continue our tight focus on cost control to achieve better liquidity and debt management. We have undertaken a comprehensive debt refinancing exercise to improve the capital structure and increase financial flexibility. We are also working with Boston Consulting Group to optimise our end-to-end delivery capability to adapt to a rapidly evolving marketplace,” he said.

Further, Suzlon has brought in more professionals to manage the company. The company has appointed John O’Halloran, former executive director of engineering at Cummins as president (technology). It has also hired former Ford India president and managing director Arvind Mathew as President, Nacelle manufacturing.