Growth in H2 to be better; LatAM biz improving: Havells

Anil Rai Gupta, CMD, Havells India is hopeful of growth picking up in second half of the fiscal, on back of demand uptick starting in cable and wire segment. "Things should start looking positive from here on," says Rai Gupta in an interview to CNBC-TV18.Electrical goods maker Havells India for the second quarter of FY16 saw a decine both in the standalone net profit and net sales compared to the same quarter of earlier fiscal.All other segments are also likely to show growth, especially lighting which saw a big demand jump in the LED segment, says Rai Gupta. 45 percent of the lighting growth comes from the LED segment, he adds.Overseas, Europe business has been steady and Rai Gupta is hopeful of improvement in the Latin American business going forward. He expects Sylvania business, which suffered losses in the quarter to get into the green in coming quarters and to be debt free in two years.He is also hopeful of a pick up in consumer demand in the coming two quarters.Talking about new products, he says all divisions have been launching new categories to stay ahead of competition but there is no significant new business as such.Below is the verbatim transcript of Anil Rai Gupta's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: Which segment has contributed to your earnings performance this quarter? Year-on-year the results have been stable but if you can throw some more colour on the segment wise performance? A: The positive aspect is that though the revenue has been flat in this particular quarter but we have seen an uptick in the overall demand cycle which is starting with the cables and wires. So there has been a negative growth of 5 percent in cables and wires but if you look at the volume growth considering the commodity price decline, the volume growth has been quite good in cables and wires segment, which is close to about 10 percent overall which is a positive point because the demand upticks starts with the cables and wires cycle and this is where we believe that going forward we will see, which has also been reflective in the month-on-month numbers, sequentially performance is improving in most of the product categories which is a reflection that things should start looking positive from here. Overall the kind of expectation that we had expected in the second half, it has not started on that note. However, it seems that sequentially things are improving a bit month-by-month. Sonia: Is there any change in the guidance or is it too early to talk about that? A: I think it is still a bit early. As I said we were expecting a better second half, which we continue to maintain. So I do not think we would be in a position to give a number or a growth number at this stage but definitely we can say that we are looking at growth in the second half. Latha: Which segment will drive the growth going ahead? A: As I said it has started off with cables and wires but over the next few quarters we will see growth in all the segments. Basically, as long as there is an uptick in the consumer sentiment, the demand cycle starts improving for switchgears as well as for consumer durables as well, we are seeing decent growth in the fan segment in this year. So overall we will see in most of the product categories especially in lighting we have also seen that there is a big demand uptick in the light-emitting diode (LED) segment and this quarter our growth in LED has been 88 percent despite the fact that our lighting growth is very muted because traditional technologies are coming down at a fast pace but the good thing is that almost 45 percent of our sales is coming from LED which shows that lighting should also see some good growth in the coming quarters. Sonia: The margins have improved for the switchgear and the cable segment as well. Is this sustainable? A: Definitely it is sustainable. In switchgears, there is a lot of cost rationalisation which has happened and even on the sale side there is improvement on the realisation front. So switchgear, we have seen that over the last couple of years it has grown from 35-36 percent to about 39 percent. So rather than looking at quarter-to-quarter, the best thing would be to look at over couple of years and we have shown tremendous improvement there. Cables and wires also, yes, there is a little bit of a benefit coming out of the lower commodity prices but also the fact that we have made various changes internally also, so we feel that these contribution margins will be sustainable. Latha: A word on Sylvania's performance. Basically demand in the European region? A: Unfortunately we saw a good performance coming out of Latin America in this quarter. Unfortunately it is marred by big foreign exchange loss in Latin America, approximately about 3 million euro. The rest as far as Europe is concerned or even Latin America is concerned, if you look at the seasonal impact, if you take away the holiday season of August, generally there is a stable performance in Europe and an improvement coming out in Latin America. Had it not been marred by forex loss, which we see the foreign exchange loss bottoming out now, so over the next few quarters we should be seeing improvement in profit after tax (PAT) levels at Sylvania. Sonia: Are you seeing any improvement in domestic consumer demand. Is there any revival on the ground currently? A: Given the last couple of months' performances there might be an uptick in the coming quarters. It's still very early days to say but we are hopeful for the coming two quarters. Latha: Any word on new product launches? A: In every division we have been launching new product categories but there is nothing significant as a new business or anything but in every product category be it switchgear, we have launched the Euro II miniature circuit breaker (MCB), which is the latest design in the country in the switchgears. So every division is launching their own new product categories to stay ahead of the competition. Sonia: When can we expect Sylvania to get back into the green? A: As I said the demand is sluggish so Europe will continue to remain stable but we are seeing a lot of improvement coming out of Latin America. So we are hopeful that we should be seeing green in Sylvania in the coming quarters. The best part is that there is a significant debt reduction in Sylvania. Last year in the same quarter the debt was around 56 million euro which is now down to about 26-27 million euro. We have always maintained that Sylvania will continue to be self sustainable in terms of funding requirement and also now with the financing facilities the move is to make Sylvania also debt free in the next one or two years.