Exide looks at maintaining 16-18% margin in FY13

With not so promising results in Q4, Exide Industries have registered a 170 bps jump in PBIT margins in comparison to the last quarter.

AK Mukherjee, Dir-Fin & CFO, Exide Industries, in an interview with CNBC-TV18, said that the company has blended price cut of 2% in battery prices. Although, the lead prices have been rangebound, there is a growth of 7% in four wheeler batteries and a 26% growth in two-wheeler batteries.

Meanwhile, Exide Industries also looks at keeping its margin within the optimum bracket of 16-18% in FY13.

Exide Industries reported a net profit of Rs 461 crore and a turnover of Rs 5107 crore in the last quarter of FY12.

Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.

Q: Before we come to the numbers, just one clarification from you. On the pricing of your car batteries, has there been any kind of a reduction because there were lot of talk about a 0-17% cut that you have undertaken in the car batteries?

A: Yes, there was a reduction in prices of car battery, on a selective basis. It is not across the board. In some cases, we have also increased the price of batteries. So, it is more of a price rationalization than a price reduction I would say.

Q: What is the blended price cut that you have taken across the segments, ballpark?

A: Yes, maybe the impact is very little. It will be just about 2% or so on an average. It’s a kind of a ballpark figure.

Q: In terms of your numbers, just one word. This time around your margins have not really come as high as what the street was estimating, at about 14.7% that you reported. Has there been any residual impact of the high cost lead inventory in this quarter’s performance?

A: Yes, 14.7% for the year as a whole. If you see from the fourth quarter PBIT margin is 15.7% compared to 14% in Q3. So there is jump of 170 bps in the PBIT margins in Q4 compared to Q3. Of course on a yearly basis it is 14.7% compared to 21% last year.

Q: Post the price rationalization that you were talking about, is there any differential in the prices of Exide vis-à-vis your competitors and could you walk us through what the market share picture looks like for Exide now?

A: Yes, after analyzing the market sources, wherever we have seen that price rationalization is required to come at par with the market trend, we have rationalized there only. In some cases, we have increased the prices as well to bring it more or less in line with the market trend.

Q: How have lead prices fared this particular quarter and do you see them move lower and then aid your margins going into the next couple of quarters?

A: There were some ups and downs in lead prices during quarter four, but it was range bound. But the more worrying factor is rupee depreciation and that will increase the landed cost at the present level. That is another area where we have to wait and see how it moves in the coming quarters.

Q: What kind of a margin do you think Exide can manage to achieve by the end of FY13 because you had many disappointing quarters due to high cost led inventory. By the time FY13 wraps up, where do you think Exide will be in terms of margins?

A: Our optimum margin is between the 16-18% bracket and we expect to remain within that on overall basis.

Q: What’s your expectation of the volume growth and realizations for FY13?

A: Realization depends on the net price movement. On the volume, definitely we are quite upbeat. It varies from segment to segment. We feel that around 15% as a whole, taking all segments together is quite reasonable.

Q: Can you give us the breakup of where the volume traction has come in that 15% growth? Between auto and industrial segment, how both the segments have looked and also within auto between the OEM and the replacement market where has the highest traction come in?

A: On a year-on-year, we had a growth of about 7% on the four wheeler batteries and 26% on two-wheeler batteries during the fourth quarter. In the industrial segment, we had overall growth of 15% in the fourth quarter compared to the corresponding quarter last year.

Q: How is the market share picture? Has there been an improvement or a decline?

A: We are observing a gradual improvement in the fourth quarter market share and feel that we can continue the same trend in the coming quarters.