Release Date: May 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rane Brake Linings Ltd (BOM:532987, Financial) achieved the highest sales for the quarter and fiscal year, with FY24 sales growing by 10%.
- Export sales for Rane Brake Linings Ltd (BOM:532987) grew by 33%, indicating strong international demand.
- The EBITDA margin for Rane Brake Linings Ltd (BOM:532987) improved by 105 basis points, driven by lower material prices and favorable foreign exchange rates.
- Operational improvement initiatives and energy savings helped mitigate inflationary pressures on operational costs.
- The company is focusing on expanding its product portfolio and enhancing operational efficiency, which is expected to drive future growth.
Negative Points
- The automotive industry had a mixed performance, with a drop in the M&HCV segment and farm tractors due to erratic weather conditions.
- The EBITDA margin of Rane Holdings Ltd consolidated decreased by 38 basis points in FY24.
- Rane Madras experienced a decline in EBITDA margin due to lower absorption of fixed costs and certain one-off provisions.
- The warranty claims have been a recurring issue, impacting the financial performance of Rane Madras and Rane Engine Valves.
- The export growth rate has tapered off compared to the significant growth seen in the last two years, indicating potential challenges in maintaining high growth rates.
Q & A Highlights
Q: Can you talk about the qualitative benefits of the merger of the three operating entities into one company?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: The merger aims to create a larger company for future growth. Immediate benefits include reduced compliance costs, stronger combined balance sheet, and tax benefits from accumulated losses. Long-term benefits include operational synergies and cross-selling opportunities.
Q: What are your thoughts on utilizing extra resources to strengthen the balance sheet and business?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We are focused on reducing debt and will consider utilizing extra resources if required to strengthen the balance sheet and business.
Q: What steps are being taken to address recurring warranty claims?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We are focusing on improving product development and manufacturing quality. The recent warranty claims are being addressed, and we believe the major issues are behind us.
Q: Why has export growth slowed down recently?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: The slowdown is partly due to the divestment of our US subsidiary. On an organic basis, exports have grown by 15% for the year. The rate of growth may not match the last two years but will continue to grow.
Q: Can you provide more details on the acquisition of TRW Sun Steering Wheels?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We acquired 100% of TRW Sun Steering Wheels for INR139 crore. The acquisition complements our existing product portfolio and positions us to provide comprehensive solutions in occupant safety.
Q: What is the outlook for the tractor segment given the IMD's good monsoon outlook?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We are forecasting zero percent growth in the tractor segment this year based on feedback from major customers.
Q: What is the status of the Mexico plant and customer base?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: The Mexico plant is progressing as planned, with revenue generation expected to start in the second half of 2025. We currently have one significant order for ball joints and are working on securing more.
Q: What is the impact of the US imposing additional duties on steel and aluminum imports from China?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: The RFQ pipeline has increased due to the China+1 strategy. We have seen some business shifts from China to India, but the full impact is still evolving.
Q: What is the outlook for Rane NSK's margins and any required cash infusion?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We are working on cost reduction initiatives and new business bookings to improve margins. No equity infusion is planned at this time.
Q: What is the typical return on invested capital for the planned INR1,000 crore CapEx over the next three years?
A: Harish Lakshman, Vice Chairman of the Board, Joint Managing Director: We target a return on capital employed of 20%-plus for our investments, with some projects in the 15% range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
