The Hindu Business Line : Motherson Sumi arm bags Rs 1,400-cr order from European cos

Motherson Sumi Systems Ltd (MSSL) announced on Monday that its European subsidiary Samvardhana Motherson Refletec (SMR) has received a Rs 1401.8-crore order for supply of rear-view mirrors to two auto companies.

This is apart from SMR’s earlier orders worth Rs 3,503 crore from Volkswagen and BMW that the company had announced in August.

SMR was acquired by auto-component maker MSSL from British firm Visiocorp Plc in March this year. SMR has 16 plants worldwide.

“The Rs 1,400-crore order is for a period of seven years, which is roughly the life of the vehicle models we are supplying for. Supplies will commence from 2011, when the new models will be launched,” said Mr Vivek Chaand Sehgal, Chairman, Samvardhana Motherson Group.

To execute this order, SMR will invest about Rs 280 crore in setting up two new plants, besides the expansion of its existing plant in Hungary. According to Mr Sehgal, one new plant will be set up in South Africa, while the other will be in Europe.

“We have not yet decided the location of the European plant. However, we are working with various governments for incentives, in order to keep our own costs low,” said Mr Sehgal.

He added that the investments will be funded through internal accruals.

Results

MSSL announced that its consolidated net profit fell 65 per cent for the quarter ending September 30 to Rs 14.96 crore, from Rs 42.31 in the same period last year. This is mainly due to interest costs, restructuring and currency fluctuations in the quarter.

Net sales on a consolidated basis was up two-and-a-half times to Rs 1,587.6 crore from Rs 620.84 crore last year. Domestic sales increased 26 per cent.

“A lower profit after tax (PAT) is largely because of the restructuring of SMR, which was spread over two quarters and the euro growing stronger,” said Mr Sehgal.

SMR has spent a total of Rs 40 crore over the two quarters towards restructuring. In August this year, it had closed down one plant in Germany, while another in Australia is expected to be relocated by the end of the year.

The company added that SMR has been PBT (profit before tax) positive for the second quarter.

Commenting on the demand in the commercial vehicle sector, he said, “Although the demand for components from construction equipment manufacturers has gone up in India, its exports have gone down by about 22 per cent.”

Acquisition plans

When asked about possible acquisitions in the near future, Mr Sehgal was positive. “We are looking to acquire companies in Europe and North America in the automotive divisions we operate in. Although I can’t name them, we are in discussions with a few companies,” he said.

Mr G.N. Gauba, CFO, MSSL, said that the company in 2005 had set a turnover target of $1 billion by 2010 and will most probably be exceeding this figure at the current rate of topline growth.

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