Release Date: February 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Domestic sales increased by 13% compared to the same quarter last year.
- Rail market demand remains robust, particularly in Brazil and North America.
- Timken India Ltd (NSE:TIMKEN, Financial) is gaining market share in the Indian rail freight market, holding over 50%.
- The company is investing in new technologies and expanding its Bharuch plant, expected to be operational by the end of the year.
- Strong performance in the process industry, with a 5% increase in sales over nine months.
Negative Points
- Overall sales declined by 10% compared to the previous quarter.
- Exports contracted by 6.6% due to global economic factors and weak end market demand.
- EBITDA margin decreased by 2.8% compared to the previous quarter, primarily due to an unfavorable product mix and lower volume leverage.
- The heavy truck market remains weak, impacting export sales.
- The company faces challenges in leveraging fixed costs due to suboptimal plant loading and inflexible labor costs.
Q & A Highlights
Highlights of Timken India Ltd (NSE:TIMKEN) Q3 FY24 Earnings Call
Q: Could you give us more color on the sequential decline in exports and how should we look at exports going forward?
A: Sanjay Koul, Executive Chairman of the Board, Managing Director: The decline is partly due to inventory corrections and lower demand, especially in the heavy truck market. However, the rail market remains robust, particularly in Brazil and North America. The expectation is that the heavy truck market might improve in the second half of the year.
Q: What is the strategic opportunity from the China Plus One strategy in the North American Railroad segment over the next three to five years?
A: Sanjay Koul: Timken is seriously looking at China Plus One for risk mitigation of supply chains. The company is investing in new plants and leveraging its existing footprint in India to capitalize on this opportunity.
Q: Can you provide the revenue mix for the quarter and explain the lower profitability?
A: Sanjay Koul: The revenue mix for Q3 '23-'24 was 18% rail, 22% mobile, 17% distribution, 21% process industry, and 20% exports. Lower profitability was due to an unfavorable product mix and suboptimal leverage of fixed costs.
Q: How is the railway segment performing, and are we losing any market share?
A: Sanjay Koul: Timken holds more than 50% market share in the Indian rail freight market and is gaining market share. The company is well-positioned with strong relationships with wagon builders and is leveraging technology and service to maintain its lead.
Q: What can we expect from the Bharuch plant going forward?
A: Sanjay Koul: The Bharuch plant is on track to be operational by the end of this year. It will focus on producing spherical roller bearings and cylindrical roller bearings for both domestic and export markets. Significant contributions to revenue are expected from FY '25-'26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
