Highlights: Revenue from Operations for the quarter improved 4% YoY mainly in India (+36% YoY); VLS revenue declined 13% YoY as a result of industry wide semiconductor shortages. Capacity utilisation levels were significantly lower than expected as key customer OEMs shut plants/ reduced volumes Consolidated EBITDA for the quarter severely impacted by the lower revenue/ capacity utilization as well as increase in raw material costs. Net Debt increased to Rs 30 billion as a result of weaker operating performance, capex and disruption to working capital cycle. Order wins: Rs 1.2 billion inflows in Q2 in India Business and € 46 million in VLS Business over past three months Consolidated Financial Performance for the quarter: Revenue from operations for the quarter was Rs 30,326 million, an increase of 4% over Q2 FY21 India Business revenue grew by 36% YoY on a lower base in Q2 FY21, and VLS revenue declined by 13% YoY (in Euro) as a result of semiconductor shortages and key customer OEMs shutting plants/ reducing volumes The VLS revenue decline was severe at the established plants as key customer OEMs shut plants/ reduced volumes while the newer plants improved YoY but the utilisation levels are lower than expected The consolidated EBITDA for the quarter was at (-) Rs 60 million (excluding China) The EBITDA for India business was at Rs 1,250 million (EBITDA margin 9.9%, impacted negatively by high raw material costs); while VLS reported EBITDA loss of (-) Rs 1,258 million Mr. Tarang Jain, CMD, Varroc Engineering Ltd. commented, “The challenging situation for the global auto sector is continuing. The severe semiconductor shortages globally have significantly reduced the Passenger Vehicle industry volumes. While the situation is expected to persist for the next few months, we have started actions to reduce our fixed costs and implement industry best operational practices under the umbrella of Project RACE. We expect the benefits from project RACE to start showing impact in the second half of FY22. Sizable portion of the benefits will be visible FY23 onwards. We remain confident of both of our businesses.” Result PDF
Summary Consolidated Financials: Revenue from Operations for the quarter declined by 19% QoQ to Rs 29.4 Billion; India Business revenue declined due to COVID second wave related lockdowns and the VLS revenue declined as a result of key customer OEMs shutting plants/ reducing volumes due to semiconductor shortages Consolidated EBITDA for the quarter severely impacted by the lower revenue/ capacity under-utilization as well as increase in raw material costs Net Debt increased to Rs 27.7 billion mainly as a result of disruption to working capital cycle, capex and weaker operating performance Order wins encouraging with Rs 2.8 billion inflows in India Business and € 99 million in VLS Business. Revenue from operations for the quarter was Rs 29,416 million, an increase of 130.8% over Q1 FY21; however the revenue declined by 18.7% QoQ India Business revenue declined by 22.6% QoQ due to COVID second wave related lockdowns, and VLS revenue declined by 17.9% QoQ (in Euro) as a result of key customer OEMs shutting plants/ reducing volumes The EBITDA for the quarter was at Rs 176 million (Ex China) Consolidated EBITDA for the quarter severely impacted by semiconductor shortage led production volume drop in VLS business and shutdowns in India. The EBITDA for India business was at Rs 728 million (EBITDA margin 7.7%); while VLS reported EBITDA of (-) Rs 544 million. China JV: China JV Revenue declined by 27% QoQ. Our share of the China JV profit was (-) Rs 26 Million as against a PAT of (+) Rs 54 million in Q4 FY21. Depreciation and Amortisation: Depreciation and Amortisation expenses have started to stabilise and were lower than the previous quarter (-7%) as capex intensity has reduced. Finance Cost: Finance cost was at Rs 386 million, lower by 10.6% YoY due to reduction in gross debt over the last one year. Project RACE: Project RACE (Rapid Achievement of Competitive Edge) to bring VLS EBIT level in line with industry benchmarks is progressing well. In the initial phase, we are working on diagnostics to identify the improvement opportunities. The implementation of actions on quick wins has been initiated and is expected to start showing impact in the next six months. Mr. Tarang Jain, CMD, Varroc Engineering Ltd. commented, “Countrywide lock-downs in India during COVID second wave and severe semiconductor shortages globally, impacted the revenue and the profitability in the first quarter. The semiconductor shortage situation is expected to continue in Q2 as well. The additional capacity for semiconductors is expected to be available in the second half and this should help stabilise the industry PV volumes. During this challenging external environment, our focus will be to steadily improve the margins in our VLS business on a sustainable basis in the coming quarters.” Result PDF