Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CIE Automotive India Ltd (BOM:532756, Financial) reported a healthy 14% growth in EBT despite a challenging market environment.
- The company achieved an EBITDA margin of 17.7% in Q3 C24, an improvement from 16.7% in Q3 C23.
- The Indian operations showed resilience with a 5% sales growth year-to-date, outperforming the weighted average market growth.
- Operational improvements and cost control measures have helped maintain strong margins in India.
- The company is optimistic about future growth, particularly in the two-wheeler and tractor segments in India, supported by festive demand and rural income recovery.
Negative Points
- Sales in the European operations fell significantly by 22% sequentially, impacted by a drop in the European light vehicle market and a slowdown in the US off-highway market.
- The European EBITDA margin decreased to 16.0% in Q3 C24 from 17.2% in Q3 C23, reflecting the challenging market conditions.
- The electrification of vehicles in Europe has slowed down, creating uncertainty and impacting the company's growth prospects in the region.
- The delay in ramping up certain export orders has negatively impacted sales growth in India.
- The company faces ongoing challenges in the European market due to the penetration of Chinese vehicles and the imposition of import duties.
Q & A Highlights
Q: What is the current state of the European OEMs, and how is it affecting CIE Automotive?
A: Ander Alvarez, CEO, explained that European OEMs are facing significant challenges due to market uncertainties, particularly around electrification. The expected market share for electrified vehicles was around 20%, but it is currently only 12-13%. This shortfall, combined with upcoming CO2 emission penalties, is creating stress in the market. Additionally, the entrance of Chinese vehicles into Europe is adding competitive pressure. These factors have contributed to a drop in CIE's European business.
Q: When is the Metalcastello business expected to recover, and what is the current revenue run rate?
A: Ander Alvarez, CEO, stated that the Metalcastello business is expected to recover by Q2 or Q3 of 2025. Currently, the monthly revenue run rate is between EUR4 million and EUR4.5 million, down from EUR6 million to EUR6.5 million previously. The market is expected to remain depressed for the next couple of quarters before gradually improving.
Q: How has CIE Automotive managed to maintain margins in Europe despite the sales drop?
A: Ander Alvarez, CEO, highlighted that the company has focused on cost-cutting measures, such as stopping factories one day per week, eliminating overtime, and reducing temporary workers. These efforts have helped maintain margins, and the company continues to generate cash despite the challenging market conditions.
Q: What is the outlook for CIE Automotive's Indian business, especially regarding delayed orders?
A: Ander Alvarez, CEO, mentioned that the Indian market saw only a 2% growth this quarter due to a weak Four Wheeler market and delays in export projects, particularly those related to electrification. However, the company is optimistic about future growth, expecting a 5-6% increase in the coming quarters as new projects ramp up.
Q: What is the current export percentage from India, and what are the future expectations?
A: Ander Alvarez, CEO, noted that exports currently account for about 10-11% of sales, down from 12-13% due to reduced demand in Europe and the US. The company aims to increase exports to 15% in the coming years, leveraging competitive advantages in certain technologies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
