Commenting on the strong performance posted by Amtek Auto in quarter ended December, John Flintham, Sr MD & CEO of the company said acquisitions would be main growth driver and growth rate would sustain going forward into FY15 and FY16 mainly on back of recent acquisitions.
Acquisition of Neumayer Tekfor and JMTAuto already contributed to growth in quarter gone by, and the acquisition of German Kuepper Group would add substantially to growth in next fiscal year, said Flintham
Although growth in domestic market was a bit subdued, exports were significantly higher to the tune of Rs 700-800 crore says Flintham in an interview to CNBC-TV18. However, now the company is again seeing an uptick in domestic orders, he said.
He is confident of maintaining margins at current levels because of improvements in process and productivity.
Below is verbatim transcript of his interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.
Reema: Amtek Auto has delivered about 57 percent revenue growth in this quarter if you look at it on a Year-on-Year basis. Is this kind of a growth rate sustainable?
A: Yes, I think you also have to understand the drivers behind the growth. Obviously this is the first quarter that includes our recent acquisitions of Neumayer Tekfor and JMT. So you have got the growth coming in from the acquisitions which is a big driver for the growth figures.
Ekta: Can you just take us through how the acquisitions did in terms of a performance this quarter and specifically for Amtek Auto how did you do in the domestic as well as the export business?
A: All acquisitions are performing in line with expectation. Obviously these were purchased in 2013 and formed an important part of our corporate strategy where we were trying to deleverage our Indian exposure and raise our more global footprint.
Originally around about 83 percent of our revenue is generated out of the Indian market and over the last year we have now changed that split to around 50:50 between India and overseas.
In terms of the domestic market, obviously a lot of disappointments in various areas, although some of the markets were not as bad as was made out and our performance domestically has actually improved, sales increased due to a number of reasons. However, significant new export orders driven obviously by the currency change that has been around for sometime.
We started a real big sales push in Europe and in America with our sales team and that is starting to pay dividends. We should see exports up significantly this year, maybe even as high as Rs 700-800 crore for this year. I think the general performance of the domestic we are winning new orders. We bagged good order intake again in the last quarter.
On average we have been taking something in the region of Rs 200 crore as an annualised figure as orders for the last 3 or 4 quarters. This quarter was double that, so that is a good intake. What we are seeing is some of those projects are coming out in production orders in factories in the last quarter which is one of the drivers also for the high domestic sales. On top of that you have got continuing localisation by manufacturers and a continuing consolidation in the industry where obviously one or two players are falling foul of the low markets.
Reema: Could you tell us more about this acquisition of Neumayer? Can that contribute even more or can the growth rate over there be a lot higher? Can you give us any kind of a sustainable run rate that we could expect from the Neumayer?
A: If you look at our run rate you talked about Rs 3,300 crore for the quarter. If you just looked at that as a general figure we are going to be in the Rs 14,000-15,000 crore level as a business which is significantly higher than we were exiting the last financial year. Also we recently announced a further acquisition in Germany and Hungary which will add another roughly Rs 1,700 crore to the business. So our growth rate is sustainable certainly through 14 and onwards, 15 and 16.
Reema: This recent acquisition about that Kuepper Group will that will add Rs 1,700 crore in the coming year?
A: Yes.
Ekta: Can you just take us through what your debt looks like and what your interest cost run rate will possibly look like as well and what are you generating in terms of possible free cash flow?
A: Obviously we do not release the balance sheet numbers at this quarter, they are released every six months, but our debt obviously has increased in the last year due to the significant acquisition. If you look at our new portfolio with a Rs 15,000-16,000 crore top-line. We are able to hold our margins through some manufacturing excellence program we have been working on for the last 2 or 3 years. They are starting to kick-in some real benefits and offset any increases in labour costs.
We have seen significant process improvements and productivity improvements. So I am pretty confident that margin will be held. This will show some significant free cash flow from the operations. The other thing we have done over the last two years is invest heavily in capacity in India and that is now finished. So we have got significant capacity we can sell. So obviously we are not going to be spending significant capex in the next couple of years. So our free cash flow will also help the debt reduction program.
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