Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales in the India business grew by 8% year-on-year, outperforming the weighted average market growth.
- EBITDA margin in India improved significantly, reaching 18.1% in Q2 C24, up from 17.2% in Q1 C24.
- Consolidated EBITDA margin for H1 C24 was 17.7%, showing an improvement from 17.4% in H1 C23.
- Return on net assets remained healthy, maintained above 20%, and return on equity was at 14.4%.
- The company generated operating cash flows amounting to 76% of consolidated EBITDA growth.
Negative Points
- Sales in the European operations decreased by 11% year-on-year due to a slowdown in the light vehicle market and Metalcastello.
- EBITDA margin for the European operations dropped to 17% in Q2 C24 from 19.2% in Q2 2020.
- Sales in H1 C24 for the Indian operations decreased by 7% compared to H1 C23.
- The European market is expected to remain weak, with H2 traditionally performing worse than H1.
- The company faces challenges in the European market due to the delay in EV orders and overall market uncertainty.
Q & A Highlights
Q: My first question was regarding our working capital cycle and cash flow from operations that seems to have gone up, and our receivables seem to have shot up. What really happened there in H1?
A: (K. Jayaprakash, CFO) The increase in receivables is primarily due to the cessation of factoring and bill discounting activities as of December 31, 2023. This has led to a rise in the reported numbers.
Q: Given the slowdown in the European business, especially with the EV market, do we need to make any changes in our business strategy?
A: (Vikas Chandra Sinha, SVP Strategy) The slowdown in EV penetration has created uncertainty. We expect a delay of 2-3 years in the electrification process. Meanwhile, we will continue supplying internal combustion engine components and prepare for the transition.
Q: Are there any acquisition plans in Europe given the current market conditions?
A: (Vikas Chandra Sinha, SVP Strategy) Acquisitions in Europe are not our preferred route at the moment. We are focusing our efforts on India. However, if a strategic opportunity arises, we may consider it.
Q: Can you provide visibility on the order book, especially for electric vehicles?
A: (Ander Alvarez, CEO) In India, 30% of new orders are for electric vehicles, while in Europe, 55% of new orders are for electric vehicles. This aligns with our strategy to transition from internal combustion to electric vehicles.
Q: What is the current situation with Metalcastello, and do you expect it to stabilize?
A: (Ander Alvarez, CEO) Metalcastello's revenue has dropped significantly, but we expect it to stabilize by the end of the year. We are working on diversifying our customer base and preparing for future growth.
Q: Why has the roof systems business been kept outside CIE India?
A: (Vikas Chandra Sinha, SVP Strategy) The roof systems business is a Tier 1 business, which is different from our Tier 2 operations. It is managed separately by CIE Spain due to its global nature and centralized R&D.
Q: What are the expectations for the European market post the upcoming elections?
A: (Ander Alvarez, CEO) The market is expected to remain uncertain until the elections. We anticipate a potential recovery in Q1 2025, depending on the election outcomes and subsequent economic policies.
Q: Can you provide an update on the debt repayment plan for the year?
A: (Vikas Chandra Sinha, SVP Strategy) We have been reducing our debt and expect to continue this trend. We aim to further pay down debt by approximately INR 1 billion by the end of the year.
Q: What is the outlook for the Indian market in H2 compared to H1?
A: (Vikas Chandra Sinha, SVP Strategy) We expect H2 to be better than H1 in India, driven by recovery in the two-wheeler and tractor segments, along with continued growth in light vehicles.
Q: Are there any new upcoming models from major customers like Mahindra & Mahindra and Maruti Suzuki?
A: (Vikas Chandra Sinha, SVP Strategy) We have a significant presence on most platforms of our anchor customers. We are likely to be involved in all their new models, given our strong relationship and importance in their supply chain.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
