India, EU doing good, profitability up: Motherson Sumi chief

Auto components maker Motherson Sumi Systems (MSSL), the flagship company of Samvardhana Motherson, has reported a 26.3 percent increase in consolidated profit at Rs 480 for July-September quarter compared with Rs 380 crore in the same period last year, driven by overall business performance.In an interview with CNBC-TV18, Vivek Chaand Sehgal, said he hopes the second half of FY17 will be as good as the first half. He said orders are coming from US, Europe and China. The company is winning orders everywhere in the world and has won an additional order of 1.55 billion Euros.He further said Europe is doing phenomenally better and huge demand is coming from the Europe market. The only weakness globally is Latin America.He also said domestic business is doing good and customers are doing better. Company's profitability is up and there are new launches lined up.Below is the verbatim transcript of Vivek Chaand Sehgal's interview to Sumaira Abidi and Surabhi Upadhyay on CNBC-TV18.Sumaira: Your earnings this time around are very, very strong so what’s the outlook then for the second half of the year?A: We have nothing to really get concerned, there is no slowdown anywhere. We have been asked to carry on the same targets that have been given to us, that’s look very, very heartening - - I hope the second half is going to be equal if not better.Surabhi: You spoke about new orders worth around Rs 12,000 crore during the first half of the current fiscal, which are the geographies that have done well for you?A: We normally don’t give a breakup on where the orders are, but I can tell you that all the orders are coming from the Americas, Europe and China so it is a very well spread out. We have been winning orders everywhere in the world that where it comes in. The other things is that the last figure we had given for orders almost about 3 billion plus has been taken out, because the orders have already started being delivered to the customer and we have won an additional order of Euros 1.55 billion in this particular six months, so that very, very heartening and very good for our group.Sumaira: Margins have improved this time around both in SMR and SMP, is there further improvement in the profitability?A: We normally don’t guide on margins, we go on the Return on capital employed (ROCE) side of it and yes there is a huge effort that has been put by the group on all the units, on all the plants to improve their profitability and improve their ROCE - - so margin is one aspect which is looked into, but please believe me lot of other efforts also bring in a lot of money that is why ROCE is so much better than margin.Surabhi: What’s the demand outlook like for the second half of this year and specifically in Europe has demand picked up there?A: I think America is more led by the trucks, SUVs and Europe is doing phenomenally well with the Euro at a very comfort level placed against the foreign currencies. One sees huge demand coming in the European side also. China is almost back I think so India has done phenomenally well as you are aware. I think the only weakness globally is in the Latin America, I hope in the next 3-4 quarters even that starts to comeback.Sumaira: The domestic business has seen good revival this time around, have you seen any new orders come through there?A: We are getting a lot of new orders, new launches have taken place and in spite of that our profitability is also up and the numbers are also up. It is the third quarter where we have crossed Rs 10,000 crore and we are very much buoyed by the fact that the customers have not given us any sign of fatigue or something like that, so as far as we are concerned our customers are doing very, very well and our business is very clear, we are the original equipment manufacturer (OEM) supplier, we don’t supply into open market - - so it is a pure reflection of how our customers are doing and we feel our customers are going to do even better in the coming quarters.Surabhi: You have given us a long term target for 2020, can you give us a near term target perhaps for FY18?A: I tell you something there is an element of acquisitions that is there. At any given time we are doing 3-4 due diligences and whether that fructifies or not depends upon the conditions and in such a scenario very difficult to give you medium term target or things like that, but we have seen in the past 4-5 years plan that we always hit our targets and have top line and a bottom line to meet and we believe that even Euro 18 billion is not really such a big target for us. If you want to look at organically we probably would be sitting at about Euro 10-10.5 billion or something like that and inorganically we could go up to Euro 18 billion, we could go to Euro 20 billion we could go to anything.Sumaira: Any acquisitions before the end of the fiscal year that you might have planned?A: If it happens it will, if it doesn’t we wouldn’t push it, but as I said we look for all the stakeholders the acquisition has to be meeting our targets and in our opinion should be delivering a ROCE of 40 percent in excess in the next 6-7 years - - so only then will we go ahead with that particular acquisition and we don’t have any feeling that yes we will do massive acquisition before, it can happen, it can happen overnight, it can go on to the next year. Really, we don’t put a timeline on to it, because it has to happen at our pace and at our comfort.