Sunil Kanojia, Group President, Sintex Industries is confident of maintaining their FY14 guidance of maintaining consolidated sales growth at 15 percent and a margin expansion of 1 percent.
Out of their two segments monolithic and prefab, he says the prefab segment continues to remain robust and will see 25 percent growth in FY14 but monolithic would see a sluggish demand. Their French business and German acquisition 'Poschmann' too is shaping up well, he adds.
However, their Indian business has not seen a major pickup but expect that to pickup due to the upcoming festive season.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: For FY14 you have guided for a 15 percent consolidated sales growth and a margin expansion of 1 percent, would you stick by that guidance, how is business doing?
A: Yes, we will.
Q: Are you seeing any improvement in domestic business at all?
A: Sintex has got multiple businesses across geographies and across market segments. So to that extent if one-two segments are not doing well still, we bank upon the other segments and try to recover from there. Although last year was not very good, we did about 15 percent growth on year-on-year (Y-o-Y) basis.
This year, the segment that is suffering is the monolithic segment but we had discounted for it already and now with the elections coming closer, we don’t see that segment doing any better in future. So for the time being we are not counting much on it, we might have flattish or maybe 10-15 percent of de-growth in that segment.
However, the prefab segment continues to do well. Last year we grew by about 35 percent, and we think we will still grow further by about 25 percent this year.
The French business too is doing well and more importantly, the acquisition that we made Poschmann is shaping up well. It was at breakeven last year but will contribute to the EBITDA margins this year and the restructuring process is already on shaping up well. So we will have a growth in that business.
US side maybe flattish but there we are working a lot. We are adding new manufacturing process; we are working for new customer acquisitions. We have a major plan for the US business to grow and whatever is required in terms of that for example changing the management bandwidth, changing processes, acquiring new customers we have been doing that. So from next financial year we will see even America turning up well. So, as far as overseas is concerned, under the current circumstances we are doing okay.
As far as India is concerned, it has not seen a major pick up so far but since the festival season is coming now and generally in the second half we do well. So I hope because of festival season, the automotive sales will pick up and we will see some kind of positive turnaround.
Q: What is your dollar earnings as a percentage of total revenues?
A: It is about 25 percent.
Q: Therefore are you advantaged by the dollar at 65/USD or thereabouts or had you forward sold?
A: It is like this that we have USD 140 million of exposure; part of it we have hedged and part of it is naturally hedged because of our dollar earning. A little bit of risk has to be taken because it is very difficult to be able to peg the likely exchange rate.
Q: You mean you are a net user of dollars; you are not a net earner?
A: Yes, we are not net earners. In the company there is a debt of USD 140 million. On the basis of profit and loss (P&L), we are neutral.
Q: Referring back to the prefab segment as well as to the monolithic segment, prefab is up 18 percent, do you expect that trajectory to better itself in the coming quarters? Monolithic was down 13 percent, would that worsen or better from that decline?
A: Prefab we are looking at about 25 percent growth this financial year and monolithic might go down by 15-20 percent.
Q: Is there an annual outgo on your USD 140 million loan?
A: 7.5 percent for the first three years and then 3.75 percent for the next two years. So, in all for five years.
Q: I also wanted to come to your other debt issue of working capital cycle that has declined a bit, the last you told us was 103 days, how is it now?
A: We will only be able to exactly figure out what the number is once we compile our data for Q2. What happens is that on one hand we moderate the number in terms of execution and at the same time collecting payments. So some payments which are stuck are stuck but its helping to reduce the working capital cycle.