Schaeffler India conducted a conference call on 19 April 2023 to discuss its financial results for the quarter ended March 2023. Harsha Kadam, MD&CEO of the company addressed the call:

Highlights:

The balanced business portfolio continued to support the performance of the company. The cost discipline and countermeasures supported the margins.

On industry front, the automotive production witnessed some challenges but the production remained on track. The passenger vehicle segment exhibited sustained production growth of 12.6% in Q1CY23. The tractor segment showed strong 34.7% growth due to low-base of 2022. The commercial vehicle production growth was muted at 3.1%.

Growth in PVs is on the back of easing pandemic related challenges and semiconductor shortages. Rising market demand, positive sentiments led to moderate growth in CVs. The growth in tractors was given a low base effect of previous year and strong rural sentiments. Two wheelers segment has shown strong pick up in March 2023.

Automotive Technologies supported top-line performance for the quarter, but headwinds in wind energy impacted industrial business.

The free cash flows have jumped sharply to Rs 3.1 crore in Q1CY23 from negative Rs 20.8 crore in Q1CY22. The company has maintained working capital levels steady at 19.9% of sales in Q1CY2023 similar to Q1CY2022.

The overall revenue growth of the company was impacted due to industrial segment which in turn was hit by the windmill equipment segment facing weak demand on account of challenges in the Europe.

The industrial segment accounting for one-third of the revenues of the company has 7-8 segments and all except wind have grown well in Q1CY2023.

The exports segment has shown moderation in revenues on sequential basis due to lag in fulfilling export orders with coarse correction happening globally on inventory side. The company sees this as a short term impact and also there would not be any significant impact of global slowdown on exports performance. The export order book is strong and the company expects the share of export in revenues to 20% from around 17% in CY2022.

Export growth has shown moderation to 10% in Q1CY2023 due to high base. About 90% of the exports is towards industrial segment.

Region wise, Europe accounts for 48% of exports, Asia 40% and US for 10-15%. Country wise Germany accounts for 40% of exports.

The company has continued progress on e-mobility transition and trajectory of business wins continues. During the quarter, the company has key win in the e-mobility segment from the prestigious client. The sample products are underway and would be ready for field trial and the company expects the supplies to start from H2CY2024. The life time value of the orders stands at Euro 300 million for a period of 5-7 years.

The company has also achieved key wins in the conventional products and alternator pulleys for PVs and double clutch systems for CVs during the quarter.

In the automotive aftermarket segment the company has increased market coverage. The volume wins have been achieved for recently launched products – wipers and center joint support continue.

The automotive aftermarket business is cyclical business and Q1 is muted quarter. The order book is strong and focus continued on portfolio expansion, diversification and penetration through range extension.

In the industrial segment also the company has achieved new business wins for two wheeler segment, off-road segment and wins for linear motion guides in the Industrial Automation segment.

The employee has increased on account of the expansion at Savli plant in Gujarat.

The focus has continued on the capex. The capex has jumped to Rs 118.7 crore in Q1CY23 from Rs 75.1 crore in Q1CY2022. The capex to sales doubled to 7.0% in Q1CY2023 from 3.5% in Q1CY2022.

The investments have continued across businesses as per framework. The company is cognizant of the volatility and challenges in the environment, ensuring appropriate actions.

The relocation program from Europe to India is progressing well. The company has earmarked 30% of the capex for relocation.

The company has achieved business wins for Vande Bharat and LHB coaches and supplies have started.

The railway segment accounts for 8% of the industrial segment revenues in Q1CY2023.