The company held its conference call on 20th Feb 18 and was addressed by key management.
Key Highlights
Lower operating margins for Dec 17 quarter was due to adverse product mix as low margin bearings orders were booked during the quarter. Lower export of large sized bearings in both mobility and railway segment also resulted in lower realisation. This together with higher input costs from high steel prices and higher employee costs on account of one time performance bonus, lead to overall lower margins for Dec 17 quarter.
The company took some shut downs in the plant in Dec 16 quarter so on a low base, revenues were up by 21% YoY to Rs 280 crore.
Expects product mix to improve from Mar 18 onwards. Some of high input costs were made pass through from Jan 18 onwards to its customers. Expects performance to improve going forward both on sales and margin front.
Is witnessing a pick up in segments like CVs & off-highway, railways and after-market segment. However bearing demand for wind segment continued to remain weak which will remain so for next couple of quarters due to uncertainty on this sector.
The company expects significant opportunities from Indian Railways in coming year to come. Indian Railways is planning to outsource maintenance of bearings for the existing wagons/locomotives to large OEMs wherein Timken India (TI) play a significant role.
Lot of work is going on in passenger coach segment in Railways. Replacement of bearings ie the new cartridge tapered roller bearings (CTRB) in place of existing spherical roller bearings for the existing coaches plus demand for CTRB bearings for new coaches is likely to augur well for TI going forward.
Is also eyeing significant business from the higher demand of new wagons and new upcoming opportunities associated with this segment.
Delay in dedicated freight corridor is the only worry which can lead to lower pace of Railway demand. Otherwise, there should not be any problem in this segment.
TI is also expected to be a key hub for export to various customers of Timken entities. Strong demand exists for company's bearings in heavy truck segment in international market.
Domestic sales account for around 65% of total sales and balance 35% is from exports.
The acquisition of ABC bearings which is engaged in manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings will be completed by June 18. Expects NCLT approval by Mar 18.
The shareholders of ABC will receive five shares of TI for every eight shares they hold in the company
TI had a strong market share in differential and pinion bearings but did not have any presence in wheel end bearings. ABC has a significant presence in wheel end bearing segment and will allow Timken to foray in this segment.
TI also plans to use the unutilized capacity of tapered roller bearings of ABC for export market where TI has strong presence.
The merger has synergies in form of expansion in capacities, customer base and new products and markets.
The company would incur capex of around Rs 125 crore for railway bearings and Rs 64 crore in tapered segment capacity.
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