Key takeaways of the call

Full impact of COVID was felt in Quarter ended June 2020. On 25^th of May 2020 the first plant started operation and gradually all plants started operation. Early Resumption of plants allowed the company to ramp-up operations and outline measures.

The company in Q2CY20 managed to curtail the effective production loss to 52 days after a full month of lockdown in April 2020, and a staggered resumption of operational activity in May and June 2020. Effective days lost in Jun 2020 was just 9 days compared to 26 days in April 2020 and 17 in May 2020. This impacted the operational performance significantly in quarter ended June 2020.

India witnessed revival in demand post unlocking of the economy in Jun - Manufacturing PMI increased to 47.2 in Jun from 30.8 and 27.4 in May and Apr respectively.

Localized lockdowns enforced across the urban centers pose challenges for a recovery as India struggles to get past the peak of the pandemic.

Rural demand, already reaching 85% of pre-covid average sales, is expected to fuel India's post lockdown growth, underpinned by higher farm income and minimal disruption due to lockdown.

Mobility that used to account for about 80-81% of revenue has shifted to 79% in H1CY20 with the share of others stand increased to 21%. This is largely due to faster recovery in industrial sector.

Loss of sales and underutilisation of capacity has hit the profitability of the company in Q2CY20. Lot of waste cost were pruned.

The company launched a new product on July 1, 2020 and this product will find application in steel, cement, power and energy sector. Used to up the time of operations. The official launch of it in India will be Oct 1, 2020.

Capex - The capex amount of Rs 185 crore in the financial statement is partly due to reclassification of leasing to capital account of about Rs 64 crore. Thus the actual cash out go for capital expenditure in H1CY20 was Rs 120 crore and this is largely for maintenance and to an extent for localisation. Of the RS 1000 crore of capex plan over three year period, the allotment for this year is Rs 300 crore. But the company is very cautious and minimised it in first half.

Export is a focus area for the company but the export market scenario is not different as the pandemic effect is same as in India across the globe.

As far as outlook is concerned, it is mixed bag. Some sectors are showing green shoots. Some started to recover and some are still languishing. Better recovery in industrial sector, wind, railway, farm equipments with some of them on fast recovery path. Some recovery in passenger vehicles. Two wheelers that hit rock bottom may get a direction in the month of August for turnaround of fortune. However Machine Tool industry is languishing, similarly there is no signs of recovery in case of Commercial Vehicles.

Content per vehicle sees good jump in LCV category. However PV side also too have seen improvement but that is little short of expectations due to project delays at customer side.

Schaeffler has equal share/mix of auto and industry. Until end of last fiscal the share of industry was 47% with auto account for balance 53% of total portfolio. In H1CY20 that has got changed as auto was the hard hit sector. In H1CY20 the share of industry was 57%, auto was balance 43%.

Share of aftermarket in total revenue is 10%.

Export is 12-13% of revenue in Q2Cy20.

Seeing continuous decline in share of diesel and confine to higher CC segment in passenger vehicles.While having strong product folio for diesel technology, the company also has product portfolio for petrol technology to meet the customer demand.

It is not possible to predict normalization of market and economy but the efforts of the company are aimed towards responding to crisis with agility and ensuring business continuity without losing sight of the future.

While slow demand still continues, the company is looking at a better H2 2020 against the challenges ahead.