EBIDTA margins maybe better by year-end: Motherson Sumi

Auto components manufacturer, Motherson Sumi, today posted its Q2 results. The company's consolidated net profit increased 466 percent year-on-year to Rs 137.6 crore in the second quarter of current financial year, helped by foreign exchange gain of Rs 67 crore.

V C Sehgal, Vice Chairman of Motherson Sumi says that the strike at Maruti's Manesar Plant had an impact on the company’s performance. "However, the good news is that with all the things being as they are, Motherson has grown very well. We have grown at a healthy 28 percent quarter-on-quarter," he adds.

Below is the edited transcript of Sehgal’s interview with CNBC-TV18. Q: Can you quantify what impact the Maruti strike in August had on your financials? Despite that, we have seen 23 percent increase in your standalone sales. So if that strike hadn’t happened, what would be the quarterly run rate for your revenues on standalone basis? A: I cannot tell you what the impact would be off the hand. But Maruti being our biggest customer, it definitely had an impact. But the good news is that with all the things being as they are, Motherson has grown very well even without the acquisition of Samvardhana Motherson Peguform (SMP). We have grown at a healthy 28 percent quarter-on-quarter and also 153 percent, if you take SMP along with it. So, Maruti is definitely important. What they went through was very unfortunate. Q: What was the performance of Samvardhana Motherson Reflectec (SMR) this quarter? What is the sustainable revenue run rate and profitability run rate for SMR going ahead given that your Hungarian plant has come on board as well? A: The Hungarian plant has still not touched anywhere close to what its potential is. Infact, if I am not wrong, it is just about 30-32 percent of utilization going on. All the huge orders we have, worth almost about Rs 1.5 billion, are now coming to fruit. You will see that quarter-on-quarter, there should be an interesting performance coming from SMR. We are quite enthused by the performance of SMR and SMP.

Q: The Peguform acquisition has reported a loss this quarter, versus a breakeven in the previous two quarters? What resulted in that little bit of a pressure that you have seen on the profitability of Peguform? What could we expect going forward?

A: Peguform is almost 80-85 percent based in Europe. August is a holiday season in Europe. So, we did have less than 8 or 9 working days in the whole of August. So the result that is in front of us is actually only for two and a quarter months. So, it is a normal feature, every year August performance is always a weak one. But in the other months, it has done very well.

Q: What kind of a run rate are you expecting both in terms of revenue as well as improvement in margins if at all?

A: Motherson has definitely grown year-on-year for the last 18 years at about 40 percent. So cumulatively, for the year we should be able to see a very healthy growth in the standalone. Now that Maruti is back in full form, we are sure that the standalone numbers will also do very well. We are also supplying wiring harnesses; we are supplying plastic parts and a lot of other things.

So, a slowdown or a strike definitely does have an impact especially if it is Maruti. We are hopeful that we will cover up everything, as Maruti is going to cover up.

Q: Your operating margins have seen a big jump on a quarter-on-quarter as well as on a year-on-year basis. EBITDA margins have come in at about 18 percent. Is this sustainable?

A: I think so. The EBIDTA margin has been helped a bit by the foreign currency also. But, by and large, our margins have always been around this. It would probably be better at the end of the year.