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Auto Inc's performance not going to slacken now: Suresh Krishna, CMD, Sundram Fasteners-The 18th China(Guangzhou)Int’l Fastener & Equipment Exhibition
8/16/2016 緊固件展-緊固件采購(gòu)會(huì)-國(guó)際緊固件展-fastener expo |
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It is an extremely strong operational performance by your company. Lower commodity costs and cost controls must have been key factors. Is this 19% EBITDA margin sustainable for the quarters ahead?
Suresh Krishna: The automotive industry in general is doing well. The truck industry has revived quite a bit, so have the car and the two-wheeler industries. The main reason for the higher profit and EBITDA levels include a better product mix and higher value-added items which we exported in the last quarter. I think this will sustain.
My personal feeling is that the performance of the automotive industry is not going to slacken now. As for exports, the American truck industry is down a bit; our exports are only around Rs 1,000 crore. I think there is a lot of headroom for us. So, sustainability looks possible.
ET Now: How much of your margin expansion was a function of operating leverage, and how much of it was a function of the commodity base?
Suresh Krishna: The margin expansion had three components. One, the raw material price was favourable, two, working capital had been contained; three, production efficiency improved considerably because of volume increase.
Besides, the product mix was very favourable. The higher margin products dominated the sales in the last three months. All of these put together made for higher profits.
ET Now: Talking of headroom, how much are you looking for in FY17 and FY18?
Suresh Krishna: It is very difficult to tell. I think we are aiming at Rs 1,000 crore. Last year it was around Rs 900 crore; this year we are aiming to breach that barrier.
There has been quite a lot of interest in specialised and highly technical products from abroad. We are trying to capitalise on that. But you know how it is with exports. The lead time — the gap between submitting a sample and getting an order — is almost 2-3 years. So, it is a continuous process of expansion and realisation.
In essence, exporting is unlike domestic market operations. In India we are already a big player; a production surge here immediately reflects on your balance sheet.
Having said that, our export has been very good too. It now accounts for 30-35% of our sales. When the export business is profitable, it adds quite a bit of power to your balance sheet.
ET Now: Brokerages that are bullish on your stock say debt repayment due to better working capital management is a key factor to watch out for your company. Your take?
Suresh Krishna: Raw material, inventory and all such things have been under control. We have had a special task force containing that. So turnover and efficiency have increased.
We keep a keen eye on working capital management. That has paid divided in the last two years. It is good news for us.
ET Now: What is the current debt? How much will it go down by the end of the year?
Suresh Krishna: That is very difficult to tell. The debt is a component of both receivables and inventory. If the business really expands, then receivables automatically go up. The stocking that is required also goes up. If export goes up, then the customers and the export market expects you to keep inventory either in India or in countries where you do business.
There is a natural ascension of inventory when the business goes up. One cannot avoid that; it is a compulsion of business expansion. But I would say that there is a good chance that our working capital will remain well managed. It will not run away.
I do not think I want to give a figure on that. It has come down quite a bit compared to two years ago. We would like to keep it that way.
ET Now: How are your receivables panning out as also recoveries in terms of your overall data days?
Suresh Krishna: When the industry is doing well, they will pay on time. It is only when the industry is getting into a recession or the sales are sluggish does payment become a problem.
I think the receivables will be good this year. It will be according to the business terms that has been agreed upon by the customer and the supplier. As far as exports are concerned, there is absolutely no problem with receivables because it comes electronically on pre-agreed terms. We do not have to run after anybody to get our payment.
With the business expansion of the automotive industry, I think the receivables should be containable. -The 18th China(Guangzhou)Int’l Fastener &
Equipment Exhibition
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