Ladies and gentlemen, good day and welcome to the Q2FY21 earnings conference call of Motherson Sumi Systems Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note. I now hand the conference over to Mr. Vivek Chaand Sehgal. Thank you, and over to you, Mr. Sehgal.
Thank you. Good evening, ladies and gentlemen. It's my pleasure to lead our team to the highlights of the second quarter performance of the group, Motherson. We are coming out of a tough period of COVID and post-COVID world, but grateful to the teams for doing an amazing job. I think all around, you can see there is a phenomenal fragrance of performance. Almost 80% of our facilities are running over 75%. Another 5%, and we'll have to start greenfield all over again. That's on the lighter side, but improved performance on the greenfields is something which is very heartwarming. We are a bit positive even in Brazil, where we've been having a lot of technical problems. Anyway, everything is on the mend and doing better and better. I know all of you might have questions as to what we have done.
So I hand it back, and we are ready for the questions as you would like. Thank you.
Can we open the call for a Q&A session now?
Yes, please.
Thank you very much. Ladies and gentlemen, we will now begin the question-answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, hi. Thank you so much, and congratulations for a great set of numbers. If you can elaborate a bit more on what really happened in the quarter, everything seems to have done so well. I think from our perspective, just beyond imagination, the turnaround in just one quarter is just too good. Can you give more color on what really changed?
I'd love to answer this question, but I'd give it to the guys who actually did the job. Vaaman will take care of the polymer side. Pankaj will take care of the wiring harness side. I think that should be good enough for you guys. Is that good?
Sure. Thank you so much.
Yeah, thanks, Puneet. Puneet, I think, of course, this was the first quarter after the COVID lockdown where there was some sort of normalcy in the operation. The volumes have definitely picked up from the pent-up demand that we had from the previous quarters and the shutdowns and lockdowns. And of course, that breathing time for the greenfields as well as the operations to come in sync with the new reality and reducing the cost. Of course, there was no travel, etc. So, there was very strong focus on the operational excellence. Again, a very, very strong focus on all the greenfields as well. And of course, the market coming back, the product mix, the take rates, all helped. And full effort done given by the team to deliver these results.
Okay. Similar to what you used to do in the previous year, it says, "So has the business returned to complete normalcy?" Are you seeing it continuing into the third quarter as well?
Yeah. Well, so far on the global side, at least, we see it continuing. Of course, different countries, a little bit up and down is really happening. But the business is strong. The customers are not really, even with the second lockdown that you're seeing right now, perhaps too early to really say, but have not really changed any volumes or anything like that.
If I can interject, in none of the geographies have the factories been shut down. I mean, bars, restaurants, and those kind of places, the cinema halls, those kind of things have been shut down. But no factories have been asked. We have not been. And that's what.
That's correct. All plants are up and running. We have not seen any plant go into shutdown with the second wave. And the customers are maintaining their schedules as of now. So as of now, all things are running normally.
Okay. That's great to hear. Secondly, on the debt side, also, you seem to have repaid or prepaid the debt. What is driving that? Do you need less debt, or is it just finding some cheaper source of capital elsewhere?
No, it is a combination of the two. You are absolutely right. The whole idea was to deleverage, and we have been saying this consistently that our CapEx cycle for the last two years after greenfield is already over, so we should see more internal accrual flowing in, and traditionally, as you will recall, September is a peak debt period because of summer holidays in Europe, but coming from a low working capital in June, and we had said that it will get released, but I think the teams have done a greater job, and while we continue to maintain the liquidity of about 11,000 crores, but we retired 400 million debt of $400 million, $375 million to be precise in September quarter, of which we used the cash on the balance sheet of SMRPBV as well.
So the whole idea has been not only to just reduce the cost, but create a balance sheet where we are prepared for any kind of a growth or any further need which the group may have.
And on the other business side, the India business also standalone has seen that the markets have come back very sharply. And our way to keep all our people, all our factories intact during the tough times and to work together with people paid off as we could smoothly transition into the high-volume growth phase again, effortlessly and in an efficient manner. So that's what is reflected in the results. And on the international side also, the teams did very well despite the markets slowly gaining momentum and our warehouse plants being in some of the countries where no government support, like in Serbia or in Mexico.
And while the market came back also for vulnerables in many of the foreign zones like Kerala and Chihuahua, we had to keep paying for the people. And we have supported all the people during these tough times so that as the situation became better, they all could come back and meet the requirements of the business. So, teams have done really well all across and kept their costs under control.
Yeah, I think that was something which was heartening, wasn't it, Pankaj? You could actually see that the reason we didn't throw out people and all that, they actually came back and really supported us at costs and so many measures, the productivity, realignment of the lines in the wiring harness side. All that particular thing was amazing, wasn't it?
Yes, because we are hugely manpower-intensive customers who are worried whether people will be able to come back and join the plants and do the production. But in most of the geographies, the work done by the teams was so good that everyone felt safe coming to the factories. The way the factories were designed, their relayouting was done, and safety was kept as the paramount of paramount importance. And even people supported them at their homes to support them in terms of maintaining all the safety measures so that they feel highly aligned to the company.
Thank you.
Thank you. Before we take the next question, a reminder to the participants. If you wish to ask a question, please press star then one on your touch-tone telephone. The next question is from the line of Siddhartha Bera from Nomura. Please go ahead.
Hi, sir. Thanks for the opportunity and congrats for a great set of results. Sir, my first question is on the SMP business. So we have done a very good performance on the greenfield. So just wanted to understand in general if as and when we scale up going ahead over the next few quarters from even from these levels, will we return to the earlier cost structure, the elevated cost structure, or shall we expect that benefits will flow in in terms of better EBITDA margins going ahead? If you can give us some color on that.
Sure. Look, the improvements that we have made in the organization are there to stay. We talked about the last call as well where we had reduced a significant amount of people, the inefficiencies. All the OEEs of the paint shop, mold shop, assembly shop are all going in the right direction. That is what's definitely helping. Of course, during the lockdown, a lot of support from the customer to re-layout, to increase our cycle time that we had to supply. So really working together with the customer during the tough times and working on the efficiencies and, of course, the time that we had to make a very, very comprehensive plan for improvement and now that the volumes are coming back, executing that has led to this, and we hope that this will continue.
We do have more plans as the product mix and the takes continue in the next quarters as well. We hope that this continues in this direction moving forward.
Also, Varman, don't you think like we were discussing just yesterday that with the new kind of government change in Europe, our original plan of bringing the Mexican and the American plants, which are very close to each other, together, and that will bring a tremendous amount of benefit for our new AlphaPak and Tuscaloosa, isn't it?
Definitely. As we will have more launches and variants that are coming up, getting the support for the launches should be that much better. And of course, the plant is also doing much better because they have put in a significant plan. So we hope that this improvement continues in the coming quarters.
Okay. Got it. So just to summarize, basically, we should not see the sharp jump from the expected costs or worker issues coming or going ahead if the revenues ramp up from where it is currently.
I'm knocking on wood. Yes. It should not, unless the new president has new walls to make.
Got it, sir. And the second question is on the order book. So now in the first half, we have got somewhere about EUR 1.7 billion of orders. So how to think about the CapEx? I mean, EUR 13.1 billion order book, if it stays at these levels going ahead, implies that the CapEx we are doing should be sufficient. Or by when do you think CapEx needs to go up to service the orders?
So as of now, no real new plants on the horizon for these orders. They should be serviceable from our existing plants. Of course, the maintenance, CapEx, etc., will be there for making sure that the equipment is always in line with the customer expectations. But as you've seen, the CapEx trend is going down with the new greenfields, and it should continue to taper.
I think also you must keep in mind that the tooling is always owned by the customer. We might have a working capital usage of that same, but normally you don't have any such big capital spend.
Got it, sir. Okay. Thanks. I'll come back to this.
Okay.
Thank you. The next question is from the line of Nishant Vass from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity and congratulations for the improvements across the company. So, my first question is towards Varman for Tuscaloosa, just in focus. Obviously, this number in terms of revenue is historic high. So just trying to understand, is the production from the customer peaked out, or you think there is more possibility from a revenue standpoint? And also, a question on the productivity, obviously, you've seen a significant improvement. But obviously, you have high benchmarks in the organization. But where do you think you are right now in terms of trying to see where you would want to be for Tuscaloosa? So, if you can shed some light on those two points.
Yeah. Look, there are still variants and models that are to be launched. So we believe, of course, there is still room for growth over there. And also it depends on the take rates of the customers. What are they picking up? More of the AMG versions or non-AMG versions? It really depends on how that is there. So small fluctuations will be there, but there are still more to come over there in terms of growth.
And also, I hope in the because we have a huge facility right next to their plant. So I'm not writing off that we won't get any more orders from them. There will be more cars, more things that are being produced, the only plant that they have over there. And we are very ideally placed. So I think as our operations become better and better, there will be that much more opportunities.
On the second part, on the productivity side, where you would think you are right now if you had to look at from an expectation basis on an ideal structure?
We are never satisfied. So no matter which plant you talk about, we will say there are further improvements to be had. Of course, coming from where we are, I would say that the low-hanging fruit has all been picked up. But now to reach really benchmark world-class levels is the effort of the team. We built a very solid team over there, a very cohesive team that is taking the charge and the lead and continue to promise more improvements as the quarters go by. So we're encouraging them, and hopefully, they will have that success.
Thanks. And my second question is on pictet. Just to understand, where are we in the cycle with the customer orders? Obviously, production still is picking up. So just could you shed some light as to when you think that the customer production more on eight 8 U.S. starts to pick? And can we expect next year to be quite robust? It just depends on that.
I think you're right that it's picking up. And as you would have seen in news reports, that the bookings have been quite solid in the last few weeks. So we do hope that it continues to keep picking up. That's what we are seeing that internationally, mobility is a factor which is never satiated, and there has to be a continuous growth in this sector.
Sir, is it in China? The joint venture, are you witnessing because the underlying market is seeing quite strong growth? So any sense on that? Could you shed some light in terms of how you're progressing in China in PKC?
Yes. We are growing very fast. I mean, the last six months, as you would have seen Pictet results, China has been a big factor. While Europe was down about 29%, U.S. was down 40% in terms of the truck volumes, and Brazil was down. One, the volumes were less, and also the currency was very weak. But China has been growing at a very fast pace, and all our three joint ventures are very well placed, and they have expanded themselves to meet the customer volumes. So we are very well placed in the sense that we are also aligned to the global truck makers in a way that as they bring in more in the times to come. So we supply to Dongfeng. We are the major supplier. We supply to JAC.
As we have joint venture with them, we have a parent company as now the partnership with Volkswagen, and we have the joint venture with JAC, which is also supporting Foton. Foton Daimler, the joint venture and opened up another facility for SH as well, so we are very well placed in China and growing.
Thank you, sir. I'll come back to you.
Thank you. Before we take the next question, I'd like to remind participants, if you wish to ask a question, please press star, then one on your touch-tone telephone. The next question is from the line of Raghunandan from Emkay Global. Please go ahead.
Congratulations, sir, on a strong set of numbers and SMP turnaround. Sir, my first question was on the utilization side. Utilization is strong, as mentioned in the presentation, over 75% and 80% of facilities. Can you provide some color on region-wise trends?
Sure. Look, I think everywhere we've seen because Q1 was difficult everywhere. So Q2 has really been the first couple of months where things have been some sort of normal. But you have to also understand that in Q2 is where we have holidays in Europe side. So you see a little bit of lesser utilization over there. But as September finishes or comes to an end, activity starts to pick back up, which we are seeing. All of America is again a little bit of a limbo because of the election time. I think that's now past. So we will see activity pick up there again. India has been fairly strong. You've seen all the numbers that are coming from all the OEMs has been quite strong and continues to be right now so far. China has, of course, went into lockdown early.
Since then, has had a very solid performance throughout, and I guess those are the major places, so till now, we're seeing that things are on track better than what we forecasted, perhaps at that Q1 level, and that consistency is there. Now, we will have to see, definitely post-Diwali, what is the situation, and then a couple of months in Europe as this second lockdown that is there, how that affects, but as of right now, everything is intact. The customer numbers and everything is still strong in all the regions that we are present in, so no different direction coming from any customers right now.
Thanks. The greenfield plants have achieved EBITDA breakeven. Considering healthy order book and improvement in underlying industry, when do you see these plants reaching optimum utilization levels?
So look, I think the next couple of quarters is also going to be key. Definitely, as we had promised to all of you, that we will first get it to EBITDA breakeven, which has been achieved. And now the push is all towards achieving higher profitability levels. So we're very proud of the team, what they've been able to achieve. There's still a way to go. Give me another few quarters and let's talk about that.
Sure. How much would be the margin for SMP excluding greenfield plants and SMRC if you have it handy?
I mean, no off the top of our head.
SMR, we don't give the data separately anyway because that is the particular part of SMP. And for greenfields, we have given the revenue number as well as the EBITDA number. So I think it can be computed from there. You need any help?
We are always guiding you on growth, so don't ask us margins yet.
I think it is important to see the team efforts which has gone during the lockdown period to really bring the operations on stream, and maybe you will not require to even know what are the greenfields because we will be giving one number which you will always like.
And I think moving forward now, these are no longer greenfields because they have now been a part and they have broken even. So they will now be considered as normal operations for our group.
Thank you. Congratulations on those wonderful turnaround. One last question from my side. Cost reduction efforts have supported margin performance. Any color on how big has been the savings or targets for this year? And would you expect all the benefits to be sustainable or any part of these cost reduction efforts which may not sustain in the coming quarters?
Very good question. But we have already achieved the numbers. I don't understand why it would be that we would allow it to slip. So barring any unfortunate thing like COVID happening or something like that, we can only improve from where we are. That's my distinct for it. But after having suffered COVID in February, March, I don't want to take bets and calls anymore. So it shouldn't happen. I think we should only improve from here. But look, I'm not going to be God if you understand what I'm trying to say.
Yeah. Thank you so much, sir. And you have nothing less than an excellent. All the best ahead.
Thank you. A reminder to the participants, if you wish to ask a question, please press star, then one on your touch-tone telephone. This is a reminder to all participants present in this conference, if you wish to ask a question, please press star, then one on your touch-tone telephone. The next question is from the line of Nishant Vass from ICC Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity again. Can you shed some light in terms of the kind of order book? I know you don't give a lot of details on the order book per se, but I just want to get a sense of the overall kind of what are you seeing in terms of are you seeing these are new customers or existing customers, the larger share? Are you seeing increased ramp-up on those customer relationships or even from a region basis or technology basis? If you could shed some light on the overall, that would be helpful just to get a sense.
Oh, sure. But you know that these are SMRP BV orders, right? We are not guiding you on Motherson and Pictet and all that. So that's all extra. But all throughout the last six months, we've been telling you that we are getting a lot of our engineering people are working from home and from plants and looking at new things. So I just want to tell you that all our customers are looking for newer models and all that because they want to catch up. If possible, the numbers, if possible, if it's very difficult, then they want to come out with new cars, new things like that. So the order book is actually telling you the new orders that we got is actually telling you that what we have been seeing and maintaining is true. The customers are very eager to come back to their numbers.
Even more important, they want to catch a bigger market share. Yes, the progress is pretty good. The orders are mostly from Americas and Europe and things like that, and some portion in the Asia side also, but that's about it.
Okay. And sir, my second question is on SMR. Obviously, it is obviously one of the most mature businesses, but it continues to deliver surprisingly robust margins and keeps on the upside. So any inputs on that in terms of how you have been able to sustainably improve it to a next level? You're going into the mid-teens now, having a 13%-14% kind of a margin level. What are the key elements that you've seen? Because even with the revenue drop, you've been able to improve and create the structure. So could you shed some light on the things that you're focused upon or changed?
On the lighter side, Bahman and mine, traveling bills have not been given to them because we are not traveling. Now, that was on the joke side. But I think, look, we have never wasted a crisis. We've gone through multiple crises up till now. Asian financial crisis. We've had the Y2K, the 9/11. We've had the last one in the Lehman crisis and blah, blah, blah. There's so many crises. So whenever we have a crisis, we guys have an unwritten rule that we have to look at our plants. We have to improve our productivity. We have to improve every single thing that we couldn't do when the whole full production is on. So that is something which is it's a written rule in the group that you have to use all crises, all particular problems to your favor.
So I think the teams have done a phenomenal job, and SMR is no exception. They are a master when it comes to cost. They really focus on that because, look, their whole idea has been always, "Don't look at too much on the top line. Keep focus on the bottom line. Keep on improving." And they've done a marvelous job. So I'm sure that they will be eagerly looking forward to the coming burst of growth that they will have. And they will use it to their advantage. But I really can't give you more color on this. Bahman, you want to add something?
No, Bahman, I think you mentioned it. They have very, very focused projects in every plant of reducing cost, and again, this COVID time has allowed us to take some time and make sure that they are really pushed through, so the team has done really, really well.
Thank you so much and all the best.
Thanks.
Thank you. The next question is from the line of Prashant Kothari from Biktep. Please go ahead. Mr. Prashant Kothari from Biktep, your line is unmuted. Please go ahead with your question. As there is no response from the current participant, we take the next question from the line of Basudeb Banerjee from Ambit Capital. Please go ahead.
Yeah. Congrats, sir, for the good set of numbers. So just continuing with the earlier question, if we see that SMR EBITDA margins are typically seasonally very high during Q4 of the year, and there is almost 200-300 basis points more than the rest of the quarters as such. So will it be right to then post this kind of cost restructuring exercise? Rest of the quarter, new normal margin is 13-14, and the Q4 spread of 200-300 basis points can result in higher numbers. Will it be a right assumption, sir?
Sir, [Foreign language] . But we'll try and do better than that. But as I said, [Foreign language] . I hope what you're saying is true. But we don't give guidance on these numbers, please. Sorry.
Sure, sir. Second thing, presently, DWH, as you have done the restatement and separately given DWH numbers. How much of DWH is India passenger vehicle now, sir?
Sorry, once again, the question, you want to know what
Percentage of DWH revenue is coming from domestic passenger vehicles?
100%?
100%. And Maruti will be what percentage of that, sir?
You are asking that out of the DWH revenue, how much is PASCAR, is it?
How much is PASCAR and how much of that is Maruti?
Okay. All right. So we don't bisect the things for DWH is 100% India business. That's what I meant when I said 100%.
But not that how much of that is Maruti and how much of that is that because we are supplying to everybody.
So we supply passenger car, two-wheelers, trucks, construction equipment, everything.
Sorry?
Hello?
You were saying something. We didn't get it.
No, no, sir. Continue, sir. You were saying two-wheeler construction equipment, etc.
So what we were saying is that we supply to all the segments, and DWH is like all the segments, whatever we supply in India is included in DWH revenue.
So basically, I was trying to see that with Maruti's volume being up 16% YOY, where operating leverage is not playing its full part. And on the other side, if I see DWH margin as per your presentation is around 11%, whereas per your earlier presentations, DWH margin varies between 14%-17%. So why this lower than the lower end of curve margin and when we should expect it to go back to that 14%-17% band, sir?
Okay. First of all, the margins which you were earlier getting were on the standalone, which is where we also do the netting of the turnover of the parts which are supplied. So this domestic wiring harness business is taken out. Obviously, this is the first quarter we have come back after the COVID impact. So as the volume picks up, yes, you will see. But again, coming back to the same, we don't guide on the margins. But definitely, the operating performance has been consistently shown a very good performance in the last quarter, and we'll continue to do better.
One last question, sir. You said in your earlier remarks that refinancing on lower cost debt will be coming in. So will it be right to assume that will get reflected in lower interest cost from forthcoming quarters? Assuming growth debt falls.
Yes, sir. That is correct.
Sure. Thanks.
Thank you. The next question is from the line of Ronak Sarda from Systematix Shares. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just a clarification on the presentation. If I look at slide 28 and 29, where you have given DWH and XDWH numbers, so the DWH numbers match to the results where we have disclosed them as discontinued operations. But if I look at XDWH numbers, while your top line is at around 1,000-odd gross, the EBITDA and presentation is.
Hello. We lost you.
Oh, yes. So we just lost the line for the current participant asking a question. We proceed to the next question from the line of Jay Kale from Elara Capital. Please go ahead.
Yeah. Thanks for taking my question, and congrats on a great set of numbers. So my first question is regarding your capacity utilization that you had mentioned that it's almost around 75%-80% of your plants. Now, expecting that things should only improve from here on for the overall automotive industry, would you kind of revisit your CapEx plans for the next couple of years, given that you may require some capacity additions from either greenfield or a little more of brownfield?
Not really. I mean, volumes will go up, but if the market is reacting well. But these orders have got well in the past. And again, 10%-15% of volume increase, we always have that planning within the plants to make sure that we can absorb that. So no real change for these orders. And even if it got great, the market is better. There's no real need of increasing the CapEx to service any of these orders. But yeah, if you get a new order or something like that, there's something new, then we will come back and tell you if we're setting up something new. But the entire order book is.
Actually, given the guidance of five years, you go to INR 36 billion. Definitely, wiring harnesses will do very well. And also, the polymer group is going to do very well. So you get new orders. It's really worth it to, if required, we'll go for extensions, brownfields, greenfields, yellowfields. You tell me whichever field I'll get into it. But we are very confident that once this particular thing is behind us, COVID is behind us, you will see a huge flurry of orders coming in from the customers and all that. So I would look forward to the numbers that we will give you somewhere around in April, May, on the order book, I mean.
Sure. So my next question is, last quarter, you had mentioned that on the inorganic expansion side, due to the government supports for many of the companies which you will be targeting are kind of delaying their plans to sell off, how do things stand today with maybe the government support getting exhausted, but the market's also improving? Are the opportunities incrementally coming in, or how do we stand today versus six months or three months earlier on the inorganic expansion side?
Yeah. I think people are looking at it from two sides, really. If you're optimist, then you're looking at it that the guys would get help from the customers to make sure that they improve or things like that. Or the other side is that the government thing is mostly loans and all that they have to repay. So it's a momentary lapse of momentary kind of relaxation of the impending danger. So my thing is that those companies which are strong in QCDDMSES are going to be supported by the customer to do better and to come out of this particular thing.
But there will definitely be pockets where we feel the pain will continue, either because they have not responded very well to this crisis or wasted this crisis away, or it could be the customer is going to look for more options and would not want a particular company to become monopolistic or something like that. So we're getting both the kind of the thing. We're getting a lot of calls from our customers telling us to look at companies, which is probably at a peak at the moment. And as of now, Bahman, I don't think we really have a huge big kind of a thing over there. It's always the medium and a little bit larger than medium companies, somewhere around between the 800 to about 2 billion kind of a number.
So we're getting a lot of those kind of companies coming in, which is telling us that the most immediate ones, which are smaller companies, they are already being looked into. But now the next set, which is small, medium, medium, medium, a bit larger, but not large, really. So I don't know. But our M&A teams are very, very busy.
Sure. Thanks and all the best, and look forward to your November 20th.
Thank you. The next question is from the line of Sabyasachi Mukerji from Centrum PMS. Please go ahead.
Yeah. Hi. Thanks for the opportunity. So I have two questions. First of all, I want to understand about the PKC operations and Class eight ordering environment. I understand that in our last few weeks or months have been very good in terms of Class eight orders. But how is that going to be sustainable in nature, or is it more of a pent-up demand? What is your sense to that?
I think it's very difficult to guide anyone on this, so we all go with the demand, as you rightly said, that we also saw that there has been a good order booking, and companies which give us forecasts for the future, they keep revising the forecasts, so when the market keeps going down, then they start telling us that it will go down, and now when we are seeing it's going up, so they do tell us that it's getting more and more positive in the U.S. on the North American side. We remain prepared, so we have kept all our facilities prepared. We kept all our people in place so that we can be the best company to support all our customers.
Apart from this, we are also taking new orders from the customers who are not there with us in that big way, which will also add on in the next couple of years, and we remain in a very strong position in the market.
But Pankaj, just to help him understand a bit more, in the past three months, three months probably is a better time for him, he got a customer from U.S. or anywhere who has to.
I'm so sorry to interrupt, but your audio is not very audible. Requesting you to please speak from the answered mode, and if you could please repeat yourself.
Yes, me?
Yes, sir. We can't hear your question.
There's somebody who's not on mute, so that's why the sound is coming. But in our office, it's absolutely quiet. But anyway, I was just saying that, Pankaj, in the last three months, we have not got any customer telling us, either in U.S. or China or wherever we are, telling us that the order position is going to go down, so you reduce your numbers or something like that.
No, they're actually opposite side. That it's going up.
Positive side.
It's on the positive side. It's going up.
That's what I wanted to know.
Maybe that helps you?
Yeah. That's very helpful. Just related to that, is there any, so I have been hearing, actually, there is some change in emission norms that are supposed to be coming, supposed to come into effect probably 1st of January 2021. Is it right in the U.S.?
Not that I know of. But if you want, we can check and let you know, but this is catching us absolutely. China will be implementing Euro 6. China will implement, but they are already ready for it. They are ready for it, so it was delayed by a few months, and now it will be implemented in 2021, but I would just say that automotive companies in the world at this particular moment are not coming under that much fire and pressure as what probably pre-COVID they were going into for emissions and all that, so just keep that in the back of your mind.
Sure, sir. My second question is only PKC itself. So I see the margins have actually come down. This is probably the only segment where your margins have come down by a way. Any reasons? I mean, what are the reasons behind it?
I think it's a low offtake, but I think Sankhrit is the best person to answer to.
Yeah. See, as we explained earlier in the call, there has been a lower offtake in this quarter as the markets have started to pick up slowly, and it's becoming better month on month. But in the US, if we look into the quarter compared to the last one, last year, same quarter, the demand has been 40% lower. In China, it's been higher. But in Europe, again, it's been 30% lower. Brazil has been 39% lower. So all across, the pickup has slowly started to move up. And our facilities, whether it's in Mexico or in Serbia, they don't have government support.
But we kept our people intact because we knew that the markets are coming back, and it's important for us to support all the people in the factory so that when we come back, then we have everything in place to support our customers.
Sure, sir. That's very helpful. Thank you. Thanks a lot. That's all from me, sir.
Thank you. The next question is from the line of Ronak Sarda from Systematix Shares. Please go ahead.
Yeah. Hi. Apologies. I got disconnected earlier. Am I audible?
Yeah, yeah. Go ahead.
Yes, sir, you are.
Hi. My question is on the presentation slide 29. If I look at the Ex-DWH business, the top line matches with the financial release as well. However, EBITDA is around almost INR 170 crores, while if we calculate it from the release, it's almost just INR 140 crores. So Gauba sir, if you can just help us understand, where's the difference?
No, because you are not taking into account the other operating income and other income other than finance income.
So we add other operating income. So does the presentation income?
You are taking the exceptional item as excluding? You are going backward, no?
So exceptional item of INR 20 crores is below the. So does the presentation include INR 30 crores of other income as well in the EBITDA calculation?
Yes, it includes because it is not EBITDA. It is profit before interest and this thing. So when you will look at the EBITDA, which is given total of this, so then the finance income and other income has been excluded. To that extent, it relates to the finance in the presentation. So we have not called this as EBITDA. We have given a breakdown of it.
Right. And on the Copper pricing, I think we have seen a sharp increase during the quarter. So the cost pass-through impact will come in the future quarter in Q3 and Q4. And that's why the EBITDA margin also looks slightly muted, or this is a reflection of how the quarter has been?
Yes, of course. I mean, that's the Copper sliding norms that they continue to happen quarter on quarter or six monthly as the customer contracts.
Okay. Good. Sure. That's a good point.
Quarter three or quarter four. But I think up to now, every customer in the world has been very, very helpful to the supply chain. And then because they understood the value of supply chain, yeah. Sorry. Go ahead.
Thank you. The next question is from the line of Daval Doshi from Pinpoint AMC. Please go ahead.
Hello, sir. Congratulations on the great number of members. I'm sorry if I'm repeating the question because I got disconnected a while back. So sometime back on a couple of previous interviews, you had mentioned you guys are looking at three to four acquisitions, of which a smaller one has materialized. Is there anything more on the cards which we can expect in the near term, or are we nowhere close to closing?
Absolutely. Why not? Our focus is on our customer. And if the customer tells us to go for something, we will not hesitate at all. So I just said some time ago that our M&A teams are very busy.
So my question was, are we at final stages or nothing out there?
How can I give you a quick answer? If I told you, then, but yeah, we are looking at a lot of things. And all these things can happen overnight. It can happen in one year. I really can't give you any guidance on that.
Okay. So secondly, with regards to the lockdown that we're witnessing in Europe, what has been the sense coming in from the company? Yeah, you mentioned that there's no change in the order book as of now, but is there some impact that you're witnessing as far as the retail sales are concerned, or that may not really materialize the way the concerns go?
No worries. No worries. I'll repeat it to you. I said that we have got no information from our corporate SMR and offices all around Europe and USA and all that that factories will come under lockdown. We are hearing that the bars, restaurants, cinema halls, shopping malls, some of these kind of things, they are locking down, but not the factories. I can confirm that from our side, all our plants in Europe and all that have not been asked to observe any kind of lockdown. Of course, all the basic care and the thing which we have to do, we are doing. But no enforced lockdown on the plants. So that, I think, is where the situation is.
Does happen? Do you see any impact happening on that front? I understand the plants are functioning, and they're doing fine. So, we may not see the kind of impact that we've seen earlier. But can we see some kind of an impact coming in from retail sales?
Look, you can extrapolate it any which way you want. You want to see a bad picture? Yeah, sure. It can affect. But we are all hopeful. We are human beings. We have a lot of hope. I don't envisage this particular thing to happen. I told you it's a bars, restaurants, and I don't think they sell cars in bars and restaurants and shopping malls and things like that. Mostly the European dealerships and all that are all outside the city. And people go there with a focused mind to buy a car. So, I'm pretty hopeful that it won't affect so much the demand. But hey, there's no way of me guaranteeing anything over there.
Obviously, there's no guarantee. But yeah, it's great that you don't see any impact as of now. Thanks a lot, sir. All the best.
Thanks. Thanks.
Thank you. Before we take the next question, a reminder to the participants, if you wish to ask a question, please press star then one. The next question is from the line of Basudeb Banerjee from Ambit Capital. Please go ahead.
Yeah. Thank you. Just to reiterate on a question just asked before. What is the timeline when you are planning on paper of a brownfield expansion if needed and that getting on stream? Brownfield, I mean. And for your existing plants like Kecskemét and Tuscaloosa, how much brownfield expansion is possible? And how the CapEx cost differential against greenfield of similar capacity?
Look, for the Tuscaloosa plant, we have built the plant in a wide area. There's still a lot of land available if we need to go for future expansions. Like I said, there are models to be launched. We are hopeful of getting successful orders after these months finish as well. So, a lot of room for growth still to come over there. And you will just see how the market is playing out. But definitely in a good position now that the plant is stable, the good management team, you are seeing the results. So, we are hopeful of growth in those plants as well.
Surely. So that's why I try to understand that if it reaches a level of utilization post which brownfield expansion is very much required. So, what can be the time interval before it gets on stream?
As we are talking, we already have six plants that are being made differently. But these are very small plants compared to the Tuscaloosa or Kecskemét or something. But these kind of growth things keep on happening because we have to keep in sync with what the customer is asking us to do. But I don't think there are major plants as such like what we were talking about for the other side. Okay?
And just to add, this is included in the guidance of INR 2,000 crores for the CapEx for this year, what we have done. Next year, we will give a guidance. So, the larger part of the investment which has gone into greenfields, the three greenfields we have talked in the past, is over. Surely, sir. Gowasar, I was not trying to understand from CapEx outgo perspective. But after so many years of low utilization, finally, green shoots are there. So, from a positive thought process angle, like trying to understand the time interval in case a new plant is required if demand shoots up so much. So that's from that angle. Our existing facilities can accommodate this with the balancing investment which is covered there. So whenever there will be some new plants, like Mr. Sehgal said, we are building a plant in Ras Al Khaimah, expanding in Serbia.
So those kind of things are part of a normal capital expenditure because we are turnover of more than 15,000 crores even in a quarter like this.
So in a nutshell, will it be right to assume that 10%-15% growth for existing SMRPBV is possible with existing growth block and minor rebalancing, whatever will be in FY 2023?
It depends on the specific investments for the projects that are done by the customers. I mean, you are well aware of that. There are some processes which get added with the new technology where the investment goes. So I can't give you one general rule, but surely, I think our ability to use these capacities much more exists.
Sure. Okay. Thanks.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vivek Chaand Sehgal for closing comments. Over to you, sir.
Thank you. I hope you understood our results better and appreciated the hard work done by all the people in the group. I would like to put on record how they have really gone out of the way to make sure that every benefit that they could get out of this unfortunate pandemic that came across is there, and you could see a marked improvement quarter on quarter. I think they have achieved a benchmark which they're going to try hard to beat in the coming quarters if everything goes fine. We are very sure that this whole particular exercise of trying to dig out every single aspect in these tough times has paid very rich dividends to the companies and the people. They've given a huge experience. I would also like to put on record the kind of help that we have got from the governments.
I am grateful that they understood the pain of the industry and did what they could. Once again, all of you, stay safe. I wish you all a very, very happy Diwali, a very happy Christmas around the corner, and a Happy New Year. I would like to invite all of you on the 20th and 21st of November when we will do our investor conference, which we will introduce you to the five-year plan and what our teams are looking forward to. As we say, on to 36 as soon as possible. Take care. Thanks. Bye.
Thank you. On behalf of Motherson Sumi Systems Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.