Capex programme on track, says Kabra Extrusion

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Capex programme on track, says Kabra Extrusion

Speaking to CNBC-TV18, SV Kabra, CMD, Kabra Extrusion attributed the fall in earnings to failure in dispatching orders on time.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Kabra Extrusion See previous management interviews See what other Experts & Brokerages are saying about Kabra Extrusion Kabra Extrusion BSE | NSE 30/05/12 Are Mutual Funds betting on Kabra Extrusion?

Speaking to CNBC-TV18, SV Kabra, CMD, Kabra Extrusion attributed the fall in earnings to failure in dispatching orders on time. "We fell short of our target on account of lot of delays in procurement of bought out components as well as some breakdown in our workshop machinery," he disclosed. 

Below is a verbatim transcript of the interview. Also watch the video.

Q: At an operating level your margins have declined and even your profitability has fallen quite sharply. What was the problem?

A: There are a couple of reasons and one main reason is that we could not dispatch the machines in Q3. Particularly in the month of December, we fell short of our target on account of lot of delays in procurement of bought out components as well as some breakdown in our workshop machinery. We could not fulfill the pending orders.

Secondly, there is a marginal increase by about 1-2% in the input costs and the input costs are rising. Though we try to adjust these higher costs of production through our selling prices but still there is an upward trend and in our case we require about 3-4 months to complete the order of a machine which is placed with us. Inspite of good orders in hand, we could not dispatch.

We hope that in the coming quarter, we will try to dispatch as much as we can and try to reduce this short-fall. But we still that our target of Rs 220 crore holds good, though we were expecting we might cross Rs 230 crore against Rs 198 crore last year. These are reasons for the margins coming down basically.

At the same time the percentage of export in our total dispatches has come down. The reason being the orders from our domestics processes are much more. There is lot of pressure to deliver the goods. The orders of exports are a little bit less. Margins in exports are little bit better as we have always realized little bit better prices in exports.

Q: A quick word on your capex and where exactly has that progressed to considering in July you did speak about some sort of capex which you all were undergoing with an investment of around Rs 85 crore and most of it was via internal accruals and not debt? Can you give us an update on this?

A: Our capex programme is going as per schedule. From October onwards, we have already taken on lease about 85,000 square feet building, which has been made as per our specification. It is on lease and we have also installed few machines. About Rs 10-15 crore orders have been placed and machines have been procured.

We have started gradual production in this new facility from last month. We feel that by March, we will able to full-fledged use these facilities. Our capex programme still holds good and as we mentioned at that time the capex will be spread over between 2-3 years because it will be slow. Whatever machines we need urgently, we will first place orders for those machines and the finance will be done from our internal accrual. If need be we might go to banks for some loans.

The machines we manufacture are for all kinds of pipes, which are required for agriculture for water management, for dip irrigation, infrastructure, housing, gas, telecommunications etc. These are all the areas where there will be good growth. At the same time second type of machines which we will be making are blown film lines for packaging.