Will achieve 2018 revenue guidance: Bharat Forge's Kalyani

Bharat Forge will achieve its 2018 revenue guidance on the back of very strong technology driven order pipeline and new innovative products says Amit Kalyani, Executive Director of the company.Speaking to CNBC-TV18, Kalyani says he expects maximum softness in the export segment in the third quarter and is hesitant to give an outlook on exports due to volatility in the industrials business. On the Europen market, Kalyani says the company has grown 6-7 percent in the region. However, the outlook remains soft due to immigrant issues and fragile economic conditions, he adds.Meanwhile, he expects maximum growth recovery in North America and India in the near future. Below is the verbatim transcript of Amit Kalyani\\'s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: We saw a big drop in the export market what is your outlook for the second half of the year?A: This is a reflection of the extremely volatility and softness in the industrial sector. As you know we had grown our industrial business to about 40 percent of revenues especially the high value sectors in which we had managed to grow our business have seen a lot of impact due to the commodity crash. This is what has affected exports very substantially. If you look at our exports, our exports are almost Rs 640 crore for the quarter which was Rs 667 crore last quarter and it was about Rs 700 crore last year. So, it is not substantially fallen it is less than a 10 percent drop but yes it is not a positive growth obviously. It is something that we are very cognizant about and we believe that we have a very good strategy in mitigating this. We have lot of new products in the pipeline which we are developing using our own innovation and research and development (R&D). We have a good customer connect and traction and we are ramping up our passenger car business which is completely on track. We are already starting to see that in the next few quarter this growth will start coming back again.Latha: Are you saying that your outlook for the export market is better now. What is your outlook? A: Right now it is very difficult to give an outlook because there is so much volatility. However, I would only say this that we will continue growing. The maximum softness in market will be this quarter. From next quarter we believe that we will start growing again. That is largely because once there is a drop in demand in any sector. There is a massive inventory correction that takes place and which I believe is taking place right now. Sonia: The maximum softness in the export market is expected in this quarter that is in Q3 but Europe continues to remain a very big concern. You saw a double digit fall this quarter around. What is your outlook for the second half? A: European market outlook is soft. Although, we should see more or less; actually while you say that we have grown in Europe Q2 over Q1. We have a growth of about 6-7 percent in Europe and next quarter also we will see growth in Europe. Latha: As we can see European sales was down 16.50 percent. I mean it wasn’t really a good quarter for you, isn’t that a concern?A: Again, a large part of that impact is because of industrial because we had a lot of industrial exports to Europe as well. Now as our passenger car and other businesses start ramping up and our new commercial vehicle business that we won in Europe starts ramping up we expect to see this getting reversed and we should be back into positive territory.Sonia: What is the outlook on the European heavy truck demand because in North America we have seen a big slowdown? Has there been a concomitant slowdown in Europe as well?A: Europe has a lot of issue right now. Right from the immigrant crisis to countries whose economy is a very fragile; the southern economies haven’t recovered yet. I think on the whole Europe should see a flat to slightly soft market for next year. However, again as I mentioned we have been working very closely with our customers and we will outperform the underlying market. Latha: The results actually were a surprise to many analysts negatively. Do you think things can get worse from here on?A: I don’t think that is right because in our recent interaction with investors over the last 12 week or so we have said that there are lots of challenges, there is lot of volatility. It is very obvious to everyone that industrial economy whether it depends on oil, whether it depends on coal whether it depends on any of these commodities there is no capital expenditure (CAPEX) taking place.Capex have been slashed to almost zero. If you look at some of our big industrial customers which announced results in the last couple of weeks they have all announced massive layoffs, massive cost reductions. We are a company which in spite of this has managed to show a decent performance. We are betting on our capability to grow our markets, to grow our products and to get back into growth. One more thing I will say is that, yes, none of us are happy about the results. We are all used to high growth from Bharat Forge and the one thing that I can say is we have a strong management team, we have very strong technology capability and every downturn we have come out stronger with a broader product profile with a deeper customer base and this is no different. We have huge order pipeline and we have a lot of products under development. We are confident that we will maintain our 2018 guidance and exceed that. Sonia: Can you just tell us for the near term what was the order intake in the quarter gone by and what is the order visibility like going ahead?A: We don’t have a business which has an order intake as such on a quarterly basis. Our businesses are all tied up three to five years in advance or there are three to five year order books which get adjusted to reflect the demand at any given point in time.Latha: Which geography do you see coming out first?A: I will tell you that for us we will see the maximum growth coming from North America and from India in the near future.