Order book healthy; dip in debt levels: Motherson Sumi

The company has been able to improve margins despite a challenging economic environment while the SMR division posted revenue higher due to ramp-up of new facilities in Hungary, says VC Sehgal, chairman, Motherson Sumi.

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Speaking to CNBC-TV18, Sehgal adds that the return on capital employed (ROCE) by the SMR division has risen to 28 percent as against 14 percent. The ROCE for the company as a whole also witnessed improvement.
"The level of consolidated debt has reduced this quarter and the Peguform division posted margins that surprised positively at 5.5 percent against 3.1 percent (QoQ)." Below is the edited transcript of the interview on CNBC-TV18 Q: What are the highlights of the company’s performance this quarter?
A: The company has been able to declare outstanding results in a very tough economic environment in India while there has been a lot of traction from overseas markets. Consolidated sales for the first time crossed Rs 7,000 crore, at Rs 7,013 crore, up by 12 percent.
Profit came in at Rs 619 crore, up 44 percent while profit before tax (PBT) is up over 79 percent and profit after tax (PAT) is up 812 percent after writing off notional or a mark-to-market (MTM) losses of Rs 167 crore for long-term loans. Each division of our company has performed phenomenally well. Standalone revenues have grown by 2 percent. Q: Can you give us break up of the earnings performance of your domestic division as well as Samvardhana Motherson Reflectec (SMR)?
A: On a standalone basis, the EBITDA of the domestic division has gone up to Rs 199 crore and PBT is at Rs 164 crore. The EBITDA of the SMR segment is at Rs 178 crore and Rs 118 crore. The cumulative EBITDA is close to Rs 360 crore and PBT is about Rs 170 crore. Q: There has been a bit of a dip in margins on a sequential basis. Where exactly is the pressure?
A: The margins cannot be compared quarter-on-quarter (Q-o-Q) for the simple reason that the previous quarter was the final quarter for the year, where the impact of a lot of factors takes effect. So a Q-o-Q comparison does not suit us. The return-on-capital-employed (ROCE) has improved phenomenally and the company has performed well on a year-on-year (Y-o-Y) comparison — Revenues are up 6 percent, EBITDA is up 8 percent, PBT is up 8 percent. Q: What might be the sustainable margin levels for the company going forward?
A: Normally, we do not discuss margins, we are more focused on ROCE and we believe that as these companies improve on their performances on a Q-o-Q and annual basis, the improvement in the ROCE dramatic. The ROCE for the SMR last quarter which was at 14 percent, has jumped to 28 percent this quarter. Q: What about Peguform? How has it performed this quarter in terms of margins as well as revenue growth?
A: I think the performance has been phenomenal. It is for the first time that the division has posted a 5.6-percent EBITDA compared to last year’s EBITDA of 4 percent. Overall, the improvement in Peguform is very heartening because all the efforts of the Motherson team have succeeded. Q: What is the current backlog in orders and when will you realise the overseas orders?
A: The order book is very healthy. A lot of new orders have already being bagged by the SMR, Samvardhana Motherson Peguform (SMP) and Motherson Sumi divisions. We will probably be better placed to make official announcements next quarter because we normally allow six months for all the orders to accumulate and get recorded in the books. Q: What is the current level of consolidated debt?
A: Our debt levels have actually come down.