Ladies and gentlemen, good day and welcome to the CIE India Q1 CY 2026 results conference call. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference call is being recorded. I now hand the conference call over to Mr. Smit Shah from ICICI Securities. Thank you, and over to you.
Good afternoon, everyone. On behalf of ICICI Securities, we would like to welcome you all to CIE Automotive's Q1 CY 2026 earnings conference call. Today, we have with us from the management team, Mr. Ander Arenaza Álvarez, CEO; Mr. K. Jayaprakash, CFO; Mr. Vikas Sinha, Senior VP, Strategy; and Mr. Oroitz Lafuente, Business Controller. We will start the call with brief opening remarks from the management team about the quarter gone by, and then we will proceed with the Q&A session. Thank you, and over to the management.
Thanks, Smit, and I welcome all of you on this call, and also Ander, our CEO. I will present CIE results for the quarter Q1 CY 2026. Let me proceed directly to the results. The results of the India operations for Q1 CY 2026 are on page six of our presentation. Sales at INR 16.2 billion were 15% higher year-on-year, largely in line with the market. This is an improvement on the 12% growth in Q4 CY 2025 and 9% in Q3 CY 2025. The growth would have been even higher if the exports in Q1 CY 2026 had not faltered, largely on account of the geopolitical situation. The Indian automotive market remains strong, though there are uncertainties created by the war in West Asia.
As discussed in earlier calls, some of the new orders, especially the ones on the export side, are coming on stream, and we therefore expect positive momentum around growth in the India business to continue into the next few months. The India operations achieved an EBITDA margin of 17.6% in Q1 CY 2026 versus 18.6% in Q1 CY 2025 and 16.8% in Q4 CY 2025. The drop in margin on year-on-year basis is due to three factors. The first, gas and material cost increase due to the Iran geopolitical situation, energy tariff increase in Maharashtra state, and third, if you remember, our Q1 CY 2025 EBITDA included a positive one-off impact of INR 87 million, which amounted to almost 0.6% of sales, and this was on account of the mega subsidy at our Zaheerabad stampings unit.
Even with these issues, the EBITDA margin increased by 0.8% sequentially between Q4 CY 2025 and Q1 CY 2026, as we focus on initiatives to reduce the impact of input cost increases. On page seven, we have the Q1 CY 2026 results for our European operations. Sales of INR 9.2 billion in Q1 CY 2026 are 17% higher year-on-year versus Q1 CY 2025. The entire growth is attributable to favorable exchange rate, but the flat sales in euro terms is as per the market situation. The EBITDA margin in our European operations in Q1 CY 2026 was 15.7% versus 13.9% in Q1 CY 2025 and 12.7% in Q4 CY 2025. Margin recovery is due to the restructuring activities done in CY 2025, which we had highlighted in our previous calls.
We would also like to highlight that the EBT in Europe, the earnings before tax in Europe for the quarter Q1 CY 2026, is almost INR 1 billion. Of course, helped along the way by the favorable exchange rate. Nevertheless, it represents a healthy bottom line in a not very exciting market situation. IHS is forecasting that the European light vehicles market will be slightly negative in the next few quarters, somewhere 0%-3% negative. While the heavy trucks will grow in low single digits, 3%-5%, but this growth is on a reduced base. On page eight, we have the consolidated CIE India Q1 CY 2026 results. Consolidated sales were INR 25.4 billion, 16% higher versus Q1 CY 2025 and 9% higher sequentially. This is the second successive quarter of 15%+ growth year-on-year, in consolidated sales.
EBITDA was INR 4.3 billion, EBIT INR 3.4 billion, and EBT INR 3.3 billion, and these are higher year-on-year by 16%, 18%, and 20% respectively. Consolidated EBITDA margin was a robust 16.9%, EBIT 13.2%, and EBT 12.9%. In fact, we have recorded the highest absolute quarterly consolidated sales and consolidated EBITDA in our history. Now we proceed to Q&A.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw 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 comes from the line of Rishi Vora with Kotak Securities. Please go ahead.
Yeah. Hi, team. Congratulations on a decent set of numbers. My first question is pertaining to India business. I know over the last couple of quarters, our top-line growth has been, let's say, on a blended basis, very similar to how the industry has been doing. Earlier we had guided that at least there is an intention to outpace the industry growth anywhere between 3 percentage points-5 percentage points. At least where are we in this journey? Are there any new orders which you are expecting, let's say, to grow in the coming quarters, which will help the company at least outpace the industry growth? Because, last two, three quarters also has been supported by the industry tailwind owing to the GST cut.
At least what is the company doing to make sure that even when the industry growth moderates, we will at least outpace that growth numbers.
Rishi, I will take this question first, then I will request Ander to add on the new order situation later. Of course, we have talked about the export orders at iron castings. We have talked about the Bill Forge two-wheeler business, both on the crankshaft and on the races side, where we are seeing a whole lot of growth, especially we are very excited about the two-wheeler crankshaft project. Iron castings, there are other projects besides the export order that we are talking about. There is, of course, many new orders in the stampings and composite space related to Mahindra itself. Next year, of course, we are expecting a lot of new orders to come on stream in our forgings crankshaft side. That is the reason why we are. Of course, the base for the last two quarters, Q4 and Q1, has been very high.
Okay.
The base growth in the market has been very high, as you rightly pointed out, due to the GST reforms. Of course, there will be some tapering down of the market, but I think as our new order momentum is concerned, I think we are in a good space there. Therefore, that's the reason why I understand that there might be some tapering down of the market, but we are quite confident in our new order situation. Ander, would you like to add anything?
Yes. You explained perfectly the situation and the view that we have about the next quarter's growth and growth expectations. As you explained, we have several projects in the pipeline now being ramped up, so that is all a positive sign. That's why we're optimistic of the near future sales. Regarding the new order allocation in the first quarter, also was a very good quarter for us. We had almost INR 3.5 billion on turnover per year new orders and approximately 11% for EV sector. Let's say that area of the company and with the new orders are coming, and we are quite satisfied with the trend. Regarding the capacities and also the way the businesses are growing, mostly all the businesses are doing well, and we are adding capacity in all the verticals in order to cope with the demand that is coming.
Overall, I would say that the growth trend that we show in the last quarters will continue. That's our expectation. Of course, providing the war and the economy, let's say geopolitics are not affecting us too much. In our basic scenario, we think that the current year, 2026, will be a good year. That's our expectations till now at least. What we expected has to continue this growth trend with all the verticals doing really well. Overall, I would say that we are confident that we will continue the current trend in the next quarters.
Understood. In your opening remarks, you mentioned that export was impacted because of these geopolitical tensions, at least. Can you give us some color on what are our end markets over here? My sense is it will be Europe and maybe neighboring countries, right?
No, we have some in U.S. Ander, go on.
What you mentioned, both U.S. market and European market, those are our export markets, are not doing well in this first quarter. That is the reason that the export rate did not grow too much. Also, some of the projects that we have in the pipeline are export projects, and when those projects start during the end of Q2, we will see this export rate to continue growing. That is the explanation, perhaps because you want to give some more details.
Ander has indicated that we are, of course, relying on new orders on the export side to pick up the overall export rate. That is where we have felt quite comfortable that way. In terms of breakup, of course, we have talked about the breakup exports at roughly around 13%-14% based on CY 2025. Out of which the direct exports are roughly 11%. Out of the direct exports, roughly about 3% would be U.S. and the rest is Europe.
Okay. There would be not any direct impact, huh? Because like container availability, market demand efficiency, and market demand response all together.
It is end market. We are not so much on containers and all of that. It is purely in numbers. Schedules. It is purely schedules.
Understood. And this aluminum, like the Aurangabad Electricals business now will get merged with standalone, right?
JP?
Yes. That is the intent, to merge CACIL into the parent company. Yes.
Understood. Now there will be standalone entity, then there will be Europe, which will also include Bill Forge Mexico, right? That is how the reporting now would be, right? There won't be any other subsidiary beyond Europe.
In India we have Hosur. Hosur and the standalone, that is how it will be.
Okay. So Hosur will still be outside of the standalone?
Yeah. It will be a subsidiary.
Understood. Just last question on the Europe piece. Any outlook on the Metalcastello business? How do you see that business, given that last two, three years had been challenging? Any recovery which you are expecting in CY 2026 or it gets delayed to CY 2027?
I think-
Ander can.
Metalcastello [inaudible].
Yes, sorry. Ander, I was requesting you to.
Yes. I was answering. The situation in Metalcastello after some, let's say, business reduction or the slowdown trend that we had in the last years, now it is in a stable situation. So we see that the business is flat or stable in this moment. Last year, if you recall, we did the restructuring activities. So now the company is perfectly aligned with the turnover level. So the margins are positive, and we are in a very nice EBITDA margin status in this moment. So what we see is that, and we are all expecting, is that the American market finally will start growing in the off-highway sector. You know that our main customer is Caterpillar. We expect that in the next quarter, this market will ramp up again.
Unfortunately, due to the different situations in the market, this market has been very low or very weak in the last couple of years. We expect that, you know, as this is a cyclical business, we expect the recovery to come soon. But in this moment, we are comfortable with Metalcastello's performance, and let's see if this market comes, and we are ready to cope with that growth if it comes.
Understood. Just last question on the gross margins. I know standalone business gross margin improved by 20 basis points on a sequential basis . Was there any commodity, you can say, inflation which came, et cetera, or is it something which will go through in 1Q? How should we look at it, at least the percentage gross margin levels in the subsequent quarters?
When you say gross margins, Rishi, what are you referring to exactly?
The standalone business.
Standalone. JP? Basically, the idea is what would be the impact of the inflation, right?
Yeah. At least the aluminum and maybe the steel prices which will be going up from July, I think so.
Yeah. Commodities, there is no issue in terms of pass-through, but there could be some other inflation, which we will take some time to sort of overcome. So there is a challenge for sure, in terms of some imports we were doing, which were helping us keep our cost. But this inflation may emerge.
Even if it is a pass-through, the margin should dilute, right? The gross margin percentage.
Yeah. Yes. As a percentage, yes.
When should we see that impact? I mean, 1Q is where we should see some bit of, maybe top line grows faster, but the percentage gross margins will also shrink, right? Or should shrink.
Yes. We will see that in the Q2, mainly because given the Q1, we didn't see it because we have not passed through. I mean, the hike of the aluminum prices happened in the last month. Now-
Okay.
-we are starting with the pass-through process. I mean, because we have the delay. Yes, you are right that we have a temporary impact because the delay of one month approximately, it affects us. We will see this impact in margins because of the dilution, because the absolute value of the EBITDA will be the same, and the turnover will be higher because of this pass-through. We will see a certain impact, especially in the aluminum business, where the increase of the aluminum price has been really high. Also we are facing this also in the rest of the regions in the world. Again, in Europe or in U.S., the aluminum is also going up, mainly because of the restrictions coming from the war. I mean, that affected the production of aluminum in the Middle East.
Understood. Hope you all the best. Thank you.
Thanks, Rishi.
Thank you very much.
The next question comes from the line of Pratik Kothari with Unique PMS. Please go ahead.
Yes, good afternoon, and thank you. Vikas, first on India, if we can talk about anecdotally we do hear about some lines getting shut here or there because of gas issues, some paint issues. So one, how serious is this issue? It was also called out that India could have done better, and not the export part, even locally it could have done better if not for this war. So just going into April, May, how serious is this issue from a-
No, of course, there is some talk, really, and rationing of things like LPG and so on. So far it has really not affected the schedules or the production. Of course, we are taking precautions. We are trying to look for alternatives like biogas, LDO wherever we can. Those kinds of things we are doing. But to be fair, there has been really no impact on the schedules because of those issues. As I talked about, I wouldn't say that the domestic market was held back by such issues during this period. I think the domestic market was okay. If at all, anything on production was really the inventory in the retail chain at the distributors end. That was the key issue in March. It really wasn't these kind of issues. Of course, we are planning. There is rationing. There is curtailment of PNG, LPG, et cetera.
That of course is there, but it has yet not had a material impact. As far as the schedules are concerned, the schedules also for the next, say, a few weeks going ahead, there is absolutely no impact of such issues so far. I don't think it is right for us to say that the domestic market was held back by such issues. I don't think so. Right now, I don't think there is too much of an impact. But yes, if it stretches, then of course these issues will get magnified. The key issue will be less of this and more of inflation and if the OEM starts passing on the inflationary impact to the market, then the vehicle prices will go up. That is what we have to worry about.
Then, of course, Ander did talk about what is happening on the aluminum side, which in fact, again to be fair, the increase in aluminum prices was happening even before February 28. It was not as if it was not happening before. There was inflation on aluminum cost even before that, but it has of course accelerated after the war started in the Gulf. So the inflationary impact is very important. There could be some disruption in supply chain. It could also be on the aluminum side. So we have to worry about it, but at this point of time it is not making an impact. That is our assessment.
Fair enough.
And just to comment.
I also.
Sorry. Go ahead, Ander.
No. I just wanted to make a comment on Vikas's statement. The risk that we can have here in this environment is that in certain cases, because of these geopolitical issues and also with the logistic difficulties that are starting, happening now in the world, our customers can have certain supply chain issues. And that could have certain temporary impact on the demands in the short term. So that's what we can also expect because of the situation. So that's the main risk that we see in the short term. What we are now seeing, as Vikas said, is that all our customers, they expect to continue the same production trend. So the only problem they can have is if the supply chain is disrupted for any reason. That's the thing that we need to monitor closely.
Fair enough. Just to confirm on the export front, you said the growth was muted because of logistic issues or the end demand issues?
End demand. Schedules. Not really on logistics. Again, there are certain constraints on, as Rishi also asked, containers, et cetera, but that's not the major impact. Again, all of this may get accentuated going forward. We are not discounting any of the risks. The risks are all there. The risk of inflation, the risk of logistics, the supply chain risk. In fact, there's another bigger risk. If the fertilizer supply chain gets disrupted and then there is a bad monsoon, then there will be a double impact on the sowing season in the later half of the year, and that will have its own impact. The risks are all there, but those risks have not manifested in a very big way so far.
Fair enough. Last on Europe. Last time there was major such supply chain disruptions back in 2022, energy prices. We gained a lot of market share, maybe at the expense of weak hands. Again, anecdotally, we do hear about lot of either orders shifting out of Europe to some other geographies or within that, some stronger players taking this. While we understand that the end market is not growing or growth rates there are muted, given the issue back again in Europe three, four years later, do we see gaining at the expense of weak hands?
Ander, the question is the European-
Yes.
-auto component industry consolidating, and will we gain in the next two to three years?
It is difficult to say if we will gain in this moment, but we expect that we will gain, and the market will continue consolidating. The consolidation is happening already. In Europe, it is clear. There are a lot of companies, especially in Germany, France, we see a lot of companies struggling, and the smaller companies are also struggling. The trend of the customers right now is consolidating.
Every week, every month, we have interactions with the customers in this sense. We are working actively on this field. We expect that at least we will remain solid in our current turnover levels. Hopefully, if this consolidation finally happens, then we will have the chance to grow. We are optimistic on that. The signals are not yet, or let's say, the results of the execution of this consolidation is not yet obtained or fixed from our side, but we expect that this will happen. Yes.
Great. Thank you, and all the best.
Yes, thanks, Pratik.
Thank you.
The next question comes from the line of Vijay Kumar Pandey with Axis Capital. Please go ahead.
Hi, sir. Thank you for taking my question, and congratulations for a good set of numbers. I have a couple of questions. I wanted to check first on the gas and energy price increase and the material also. If you can please quantify the impact on the Indian business as well as in the European business from this. Was it mainly for the one month, or do we expect to see this to increase over the next coming period, because now, if the war persists, it will continue for two months or so on. If you can help us with the gas and material price increase.
Vijay, I would assume you are asking whether, first, the gas price increases will remain at this level going forward. That price increase has happened. What is the impact of that on our financials in Q1. Right? Are these the two questions?
Yes.
We assume that given the supply chain risks and given the disruption in the supply chain of gas, we do expect this to remain elevated for some time. It is not really a temporary phenomenon, gas increase. We are more concerned if the supply remains constant, rather some price increases will happen, and we expect the price increases to be there. In terms of the impact, right now, the impact has not been much. We did talk about the drop in our margins from, in Q1, our margin was 18.6%. Today it is 17.6%. 0.6% of that is coming from the stamping subsidy, and the rest is divided between the energy tariff increase and the gas increase that you are talking about. If you look at 1%, 0.6% is coming from the subsidy.
Out of that 0.4%, some part of that is coming from what we are talking about, the gas price increase, and some part of it is coming from the energy tariff increase. If you remember, in our last call also, we had said that there was an increase in power tariffs in Maharashtra, which was having an impact. In our year-end result, we have quantified that impact. So that 0.4% drop is divided between these two things. You can make an assessment. It is somewhere between 0.2%, 0.3%, that kind of impact we are talking about as far as the gas is concerned. Okay?
Okay. Secondly, sir, the new export order for the U.S. business. That remains on the draft. That is not getting impacted from the end user market or from the geopolitical-
Zero impact at all. Of course, right now the tariff thing, as you know, is still open, but it is now more or less where it is. So we have had no impact on our export orders to the U.S. And as Ander pointed out, we will start in Q2, and of course, the bulk of it will be in the second half of the year.
Also, when it comes to the euro, the IHS guidance is pretty weak for second quarter, third quarter. So we wanted to check, is there going to be more downward risk from here? How are you seeing the on-ground situation? Because 5% decline in production numbers for second quarter. So do you expect it could go further down than this, or things can be better from here, or this is the worst-case scenario? And also on our margin. Our margin has been pretty volatile in euro for at least from last three, four quarters. So just want to get a steady state number. What is our expectation? In the near term and the long run.
I will make a few comments. I will make a few comments, and then I will request Ander to talk about the European market a little bit. I think the European market is very steady. It is almost stable, 16 million units of production. The issue is how much is the Chinese share in that? That is all. It is pretty much stable. We are not looking at - 5% going to - 10%. Of course, on a quarter-to-quarter basis, IHS is talking about - 5% and - 1%. But if you look at the entire year prediction, it is still about - 1%, - 2%. That is not much of a difference. It is steady, and it is expected to remain in this range, 16 million-16.5 million for the next couple of years as per IHS. The market is steady. It is not moving up and down.
It is steady at a low level, that is all. The second question around margins, that our margins were fluctuating. Now, if you look at it, our margins, we were doing some restructuring activities. If you put back the restructuring activities, we have been in the range of 14%-15% or 14%-16% in that range, if you add back the restructuring costs that we are talking about. In Europe also we are at a very steady margin. Right now what you are seeing, we had restructuring activities going back to Q2 of last year. Some of that the European margins that were reported were affected by the restructuring cost. In this quarter, there is no restructuring cost. You are seeing the full impact of those restructuring activities.
The margin has been steady somewhere around 15% if you take away the restructuring cost, so to say. That is since you are talking about a steady state on both the market, on the margin side. Now I will hand it to Ander. He will explain more what is actually going behind rather than just the numbers.
You explained it perfectly, Vikas. I mean, the situation in the market in Europe is stable. I would say that the behavior or the performance that we expect for the next quarter is that we will see a rather stable market. Not big changes are expected. Perhaps because of these political tensions, we could see certain slowdown, but overall, I think the impact of the world is not big in Europe. Also regarding Spain and regarding the gas and energy price increases, in Spain, due to the high percentage of renewable energy production, the energy prices have not gone up in this first quarter. And so we expect that the energy prices will remain more or less under control. Also the future of the gas for next year is around EUR 35 per megawatt. Let us say quite stable.
So let's say that our view of the near future in Europe is we will be more or less stable. Regarding the margins, we saw a certain recovery after the restructuring activity that we did last year. We expect to be in that range. In the near future or during the next quarters, if additional restructuring, small activities are needed, we will accomplish them because what we are now looking is always to the long run and just to be ready to keep and to maintain our margins in the long term. That's the approach that we have. We have a profitable business, a cash-generating unit in Europe despite this low base, and we will continue like this.
Thank you, sir. Thank you for the detailed answer. Just wanted to. More of a broad level question. With the Chinese cars entering into the European market and setting up factory, do we have a plan or can we get also to supply products to Chinese companies, or will that not be feasible? If you can just comment on that.
Yeah. The Chinese cars that are sold now in Europe are mainly produced in China. They are now entering the European market, and they will start producing. That's the plan they have, to produce in Europe. If they produce in Europe, for sure we will be there. We have been quoting, we are working with them. So far, locally, we don't have, let's say, Chinese customers in this moment in Europe, but mainly because there is no production. Once the production starts, we will probably be there because in the European area, we are quite competitive supplier.
Of course, the competition is worldwide, but what we expect that certain local content rules will be there, and there are also a number of barriers like the carbon adjustment on the border, I mean the CBAM activities. All these kind of things will come. We expect to be supplier for any OEM that will produce cars in Europe.
Thank you, sir, and all the best for the coming quarters.
Thank you.
Yeah. Thanks, Vijay.
Thank you. The next question comes from the line of Ganesh ram with Unifi Capital. Please go ahead.
Thank you, Vikas and Ander. You have been very clear so far. I just have a couple of questions. The first one is on the India market itself. Vikas, you previously indicated that directionally you have grown 9%, 12%, 15%. When we look at the forecast from IHS, when we compare how this quarter has been to the next quarter compared to what we expect next two quarters are above 9% in every category this quarter, but expectations are around 8%-10% in the remaining two quarters. How do we expect to perform relative to this industry? Do we think there can be an outperformance of 3%, 4% with the new orders that are coming in? What is the quantum of outperformance you expect?
We do expect to be a little higher than the market. We have been last two, three quarters, we have done well, but a few quarters before that, we were a little tardy. Yes, we are confident about the growth. We should be market plus. Of course, it also depends on the market. We have many customers, so you know how different customers behave. For example, Hyundai and Bajaj. Bajaj did well in Q1. Hyundai did not do as well in Q1. Then within those customers, there will be some models which perform better or worse. Depending on that. We are more or less across different customers, across many models. We are in a very comfortable situation as far as that is concerned. We do expect to be a little higher than the market. Given how everything pans out, we will see the quantum.
I leave it at that. It is very hard for me or not right for me to even try to justify what kind of outperformance. I think you are right. The market will taper down a little bit given from the GST highs, but it is still very reasonably good. Hopefully, the impact of geopolitics, petrol price increases, which everyone is expecting maybe a few weeks later, that does not have a dramatic impact. I would say that we are comfortable on the growth side, but quantum, let us leave it at that.
Okay. Do you think you will be able to sustain at the low teens level? Do you have any production constraints currently? I think last quarter you mentioned there were some constraints because of the ramp up. Just to check if that has been elevated now or, yes?
No, we are in the process of increasing our capacity. If you look at our growth numbers and growth CapEx numbers this quarter, we do expect growth CapEx in India to be higher than last year. That is number one. Number two, right now almost 95% of the growth CapEx is being done in India. So we are adding capacity, and we are adding capacity across the board. If you look at our annual report, we have clearly mentioned that almost all verticals, except maybe magnets, we are adding capacity, which is as per the new orders. So right now, we are okay with this capacity situation. 8%-10% growth is fine, but a lot of capacity additions are happening because of the new orders. Capacity should not be a constraint going forward.
But as I said, next few months or next one and a half years, I think there is a lot of focus on growth CapEx in India. So that will continue. So we will continue to do that. Okay?
Understood. And this is my last question. On the export impact that you were talking about from India, would you have an estimate of how much of exports could have been achieved this quarter that has probably been delayed to the coming few quarters?
It is not delayed.
That's my last question. Thank you.
No, no. Thanks. It was not delayed. The schedules were lower. Now, if the Indian market grew in the range like we have talked about that almost 10% growth for light vehicles and 20% growth for two-wheelers and the other segments. The exports was in, say, mid-single digits basically in Q1. But Q2 onwards, as Ander mentioned, we are banking on new orders, so that situation will change. No matter what happens on the geopolitics side, I think for us, our export performance will improve Q2 onwards because of our new orders. That's what we are hoping.
Just to clarify, you're saying it wasn't an impact because of logistics, it was an impact because of schedules? Or is it that the schedules were impacted by logistics? Just to be clear.
Hard for me to say. From our point of view, it was schedules. It's not that we were not able to send our goods across. So that's why I'm saying less logistics. Well, for them, as whatever is happening on the supply chain for OEMs there, that could have been a factor. But for us, the schedules were low. That's all.
Okay. Thank you, Vikas and Ander, all the best .
Thank you.
Yeah. Thanks. Thanks.
Thank you very much.
Thank you. The next question comes from the line of Bharat Sheth with Quest Investment Advisors. Please go ahead.
Good afternoon, Ander and Vikas. Thanks for the opportunity. Ander, you stated that consolidation in Europe is happening. Can you give a little more color for which product set, particularly crankshaft and metal casting also? If you can give some color, how do we see we are with the consolidation, getting market share and maybe able to do some kind of a growth down the line next three, four quarters?
Yes. The reality on the consolidation, if we look at our crankshaft production, for example, in our European units, we have been able to maintain the crankshaft production in the last quarters. Okay? Considering that the internal combustion engines volumes are slowly going down with the EVs growing up and also with the entrance of the Chinese competitors, then we see that we have been already consolidating partially this production of crankshaft. Okay. What is happening in Europe is that our customers now, they are concerned that in their supply base, they have suppliers with a very complicated financial situation, and some of them, they are already struggling. If you consider that in the north of Europe, for example, there are also some stresses on the energy prices and also some inflation, the materials and so on.
Then the financial situation of these struggling competitors will worsen in the next quarters. So the customers are looking for the solutions to, let's say, assure their supply, and they are coming to us in order to increase the production. So that's what's going on. Some specific suppliers are being, let's say, eliminated, and the strongest suppliers will continue. In that, let's say, consolidation process, CIE India is very well positioned because we have a very solid financial situation. Our companies are running perfectly, smoothly. Our quality levels, delivery performance are exceptional. So in that environment, I think we will be one of the winners on this consolidation. That's the reality, and now we will continue. Of course, it's not a nice situation because, of course, our growth will come from, let's say, the bankruptcy or the difficulties in other competitors.
That's not the best way to grow, but of course, that's the market, and we need to adapt, and we need to survive in this difficult market environment. That's the basics of our view, and we think that we are very well positioned to continue with our, let's say, production, hopefully with certain growth, and at least with maintaining the margins and even improving them if possible.
How about Metalcastello? What's our outlook now? Currently, we are operating what level, and how do we see, is there any improvement or not?
Metalcastello, as I explained before, Metalcastello is doing very well now. The company is now adapted in all the structure and the manpower. Everything is in line with the current production levels and demand levels. The company is in a very solid situation with good margins, with maybe the margins around 20% of margins, so it's in a very solid position. Regarding the market, you know that all these off-highway products are, let's say, in a very weak market situation, and we are ready to grow and to recuperate the margins once the market comes back. Our dependence on U.S. market is important, so we are waiting for the U.S. market to rebound and start producing. My comment would be, in Europe, the off-highway production is very low. The strong production is coming from U.S. and also from Asia.
Our position, we look for U.S. market, and we're waiting for that. Also, one important comment on Metalcastello, if you recall in previous quarters when we were talking about the EV programs that we were awarded.
Correct.
Those EV programs, unfortunately, did not come. The real production of these EV programs will be, I don't know, 10% of that, a minor fraction of the expected volumes. That's a reality. That's one of the reasons why we are not, let's say, growing, or we are not recovering the previous levels. That's the market reality in U.S. You know that the electrification has gone down, and most of the electric programs have been canceled by our customers, and that's something that we need to wait. Probably will come later on in the future, but in the next quarter, we are not expecting them to come. At least while this administration is in office in U.S.
Second question is related again. This energy fossil fuel crisis has erupted in Europe. Do you think that EV adoption will accelerate than what it was in the past, and how do we think then about the ICE engine market?
Yes. Hello?
Yeah. Hi.
Yeah, Vikas.
I just hope Ander is-
It seems that we have lost Ander.
Yeah.
Sorry?
[inaudible]
I think the connection was up.
Sure.
I do not know where I will cut in the communication.
You may restart, please.
We were talking about the EV market in Europe.
Correct. Because of this, again, prices in the fossil fuel, how do we see the adoption again accelerate, I mean, EV?
Yes. What we see is that you are right, that at least in the last month or two after the war happened and the petrol prices went up dramatically in Europe, then there has been a reaction from the market and more the EV market has seen an acceleration. We see this trend, recovering a little bit. The best sold car in March in Europe has been the Tesla Model Y. Again, they were very low on sales. Now they recuperated, so this is something that is happening. But what we see is a certain recovery to the previous forecast. Okay? There is no big jump on that. There is no big movement. And we still think that the problems on the EV adoptions are still the lack of infrastructures and the range anxiety that is not yet solved.
These ranges of 500 km, 450 km are not enough to convince the mass consumers. Okay? So we see certain acceleration. We are okay with that because you know that we have been, in the last years, working on the EV side also. So we are comfortable with that. So we are adapting our production to the demand of the customer. So we have no chance than looking for the balance between the two technologies.
Okay. And last question on the India side. Because earlier we had a lot of tail end customer win, but which we were not, for one or other reason, were not able to really ramp up and grow. So how do we think about despite this new deal win, how do we see this really a tail end can start making a bigger contribution to our sales?
No, Bharat, thanks. A lot of these new orders, it is for, as I said, not tail, but if you look at our four main anchor customers, M&M, AS, FES, Maruti, and Bajaj. Beyond that, for example, Ford is becoming a very big customer. Hyundai is very important. Royal Enfield is very important. So a lot of these new orders, as you know, Allison is getting more important. We have been steadily working with John Deere over many, many years. Very small increases every year, but now very substantial. So that part is happening. It is not that it is not happening. As we have pointed out, given that the diversity in our customer base, sometimes when M&M was growing, Bajaj was not growing. Now when Bajaj is growing, Hyundai is not growing as much. So that portfolio balancing will happen.
But as I said, we are quite okay with the new order situation. Yet in the meantime, some few quarters back, we had the issue with our CIE Hosur production. Then there were certain electric vehicle orders that had not come about. All of this had got bunched together. But now hopefully, it is being more balanced. Now we are seeing a much more balanced growth. I do not think we have any, to put it very simply, we do not have issues with either our customer base or even the diversity of products or even new orders. As Ander was pointing out, our new order performances has been pretty good. Even going forward next 15- 18 months also, we do not have much of an issue around new orders. So we are quite comfortable there. Earlier what had happened that our orders that were delivered got bunched together.
Now we have a much more balanced mix, so you are seeing a much more balanced growth that you are seeing now. And that is exactly what we are saying. Once that balance happens, you will not have that problem. So that is how I will put it. It has been balanced out. For example, in Q1, exports did not do very well. Exports, we have MPPM from our aluminum plant. They did not do that well. But you know, the other side did well. Hyundai did not do well. Hyundai had only 2% or something like that in Q1, which is, given that the light vehicle market grew almost 10%, it is way down to performance. But it did not impact us that much because that balancing is happening now. So that is all. We are quite comfortable on the new order side, on the diversity of products, diversity of customers.
I do not think those are issues. The issue earlier was the bunching, which I think, hopefully, that is behind us now.
Okay. Thank you and all the best.
Yes, thanks, Bharat bhai.
Thanks.
Thank you. Thank you very much.
The next question comes from the line of Priya Ranjan with HDFC AMC. Please go ahead.
Hello. Thank you. Just couple of things. One is on the CapEx side. Do you see there is acceleration in CapEx this year? Because last year we were sort of capacity with many of the quarters, and when the demand has picked up. How do we see this, do you need to increase the kind of presses, maybe higher tonnage presses, et cetera, is required now? What is the CapEx and capacity increase?
Priya Ranjan, I'll of course leave it to JP and Ander to answer, give more color on the details. The answer to your question is, in India, the growth CapEx will be much higher this year and probably next year also. The other part, are we looking at different tonnage of presses in forgings, in aluminum casting, et cetera? Yes, we are looking at that also. With that, Ander, I'll request you to give your perspective.
Yes. In India, in this quarter, we have already invested around a little bit more than INR 900 million. That is close to 6% of the sales. So it's in line with our internal, let's say, control targets. You are right, in the second half of this year, we expect to boost the CapEx and we will, let's say, probably surpass this 6%- 7% of the turnover in India that we are, let's say, fixing as a control target. Okay. Regarding the different presses and machineries and everything that we are now looking for, you are right. We are adding at least three new forging lines in our forging business. We are also adding a metal stamping line for our customers because we are also fully booked in this moment.
We are also adding iron casting molding line also to increase our capacities and to cope with the demand that is coming for the next year. As you can see, we are adding machinery and capacity. All this capacity will be installed in the next quarters. So we expect that our capacity will increase, and of course, our production will increase. So we are aligning the demand with the CapEx, and that way we control perfectly this situation. I can tell you that we have not been short of production in this. Yes, we have been tight in certain technologies, but not short. In the future, we are adding the capacity, let's say, to go with our customers, to be in line with our customers' requirements in terms of capacity. Some of them, they are expecting big growth. The new projects are also there.
Of course, we need to be ready for the growth when it's coming. So that's more or less to give you a flavor of, let's say, adding capacity in almost all the technologies. I would say that except in the magnets, that is a very specific business. The rest of the businesses will add new capacities.
For full year, how much CapEx we are planning now? This year for the full year.
Yes. You can imagine that if we have done close to INR 1 billion in one quarter, we can talk about it is INR 4 billion-INR 5 billion, that would be the CapEx that we can be expecting in India in this calendar year.
I am just a little bit puzzled about your Metalcastello performance. If I look at the Caterpillar global growth, they have been growing very, very strongly. The North America market, et cetera, is growing like 18%, 17%, if you look at. What category of the Caterpillar you are catering to, and that is why you are underperforming? If you look at the Caterpillar numbers, it does not show that there is a weakness. Why should we underperform there? Unless we have certain segment which Caterpillar is also underperforming, and why.
Yes. We are working for Caterpillar in the transmission sector, okay? The balance of the production, that, of course, depends because Caterpillar has its own internal capacities, and then they outsource part of the components to, let us say, reliable customers and strategic suppliers like us. Also they are producing part of their production in Asia, in India and other countries. Okay. Let us say that with Caterpillar, we had this slowdown because of the product mix that unfortunately we were there, and we expect that this production, and at least with the comments coming from Caterpillar, is that this will ramp up mainly as when there is a situation when the customer is producing and deciding make or buy, then our position is weaker, but we expect to grow and to recuperate our market share in the next quarters.
The point on Caterpillar is we depend on them partially in Italy and with all these, probably the tariff issues and geopolitical issues, they decided to integrate or to insource more than outsourcing the production. That is the balance or the decisions that our customers are doing. They are not always very transparent with the suppliers. They make their own decisions depending on the situations. We are expecting this route to come, and we are ready. And the strategic relation we have with them is fantastic, so no issues there.
Okay, great. All the best.
Yeah.
Thanks.
Thank you.
Thank you. Ladies and gentlemen, this will be our last question. It is from the line of Viraj Kacharia with SiMPL. Please go ahead.
Yeah. Hi. Thanks a lot. Just two questions. First is, you talked about us benefiting from consolidation starting next few quarters. Any color you can give in your conversation with customers, is we benefit more from the European entity or you see a further ramp-up in exports from India to Europe ?
Raj, let me take this question first, and then Ander can add more details based on his experience. First question around consolidation in Europe. Yes. As Ander pointed out, consolidation is happening. Some manifestation is we are able to maintain our franchise production even in a declining market, but that consolidation takes time. As you know, it does not happen at one go. Yes, consolidation will happen eventually. It is not going to manifest itself in the next quarter or the next two quarters or something like that. Eventually, it will happen. And because we are such strong players with strong manufacturing capabilities as well as a very good financial position, we expect to benefit in the medium term. It's not going to happen in the next one year or so, something like that.
Because when we say consolidation will happen, if you recollect, Europe used to do about 20 million car production, say pre-COVID or whatever, and that's now down to 16+ million. There is the threat from Chinese imports or Chinese supply in Europe, which will even make. That is the reason why consolidation will happen. But these things are stretched over a period of time, because what happens is that the capacities don't go out of the business. Most of the time they are either bought by a private equity guy or by somebody who tries to buy all the underperforming assets, and then it takes some time before it leaves the market. That's really on consolidation. It will happen. It will take time. The second aspect on whether the European light vehicle industry will start outsourcing more to India.
That question Ander has answered in the last call, but I'll repeat that. The outsourcing from Europe to India has been more on the truck side and less on the light vehicle side. What is happening is that with the European FTA, that India and Europe had that FTA, I think there has been an interest and a lot of buyers in the light vehicle space also to look at outsourcing from outside Europe. And they are, of course, considering different geographies, but the first places where that's going to happen are in iron castings, where we are seeing the impact. We are seeing a lot of RFQs coming in gears and machining, where India has a very big competitive advantage that's happening.
Some on the forging side and perhaps at some point of time on aluminum casting, but unfortunately, aluminum casting India is not that competitive at this given point of time. Yes, that will also happen, but neither the consolidation nor the exports will happen in a hurry.
Yes.
That is something we will ask you to keep in mind. It is not going to happen in this calendar year, for example. There will not be a tangible impact. But over the next two, three , five years, definitely both the things will happen, and on both we will gain. With that generic remark, I will request Ander to add details and his perspective.
There is a clear situation now and a clear interest from most of our customers here in Europe to localize the production in India. We are in contact with them. They are absolutely really interested in our capacities in India, and we are developing, we are recruiting, they are visiting us, they are auditing our facilities in aluminum, in forgings, in machining, in gears, castings. We have the strong commercial activity in this moment regarding this transfer of the potential exports from India to Europe. We are very optimistic on that. We are preparing ourselves to be ready to supply properly to Europe in the next years. That will be a reality. I think that India will be a winning market, a winning region on this European supply, especially because of the competitivity and the, let us say, price pressures that European OEMs are having.
In this sense, we are perfectly located to supply from or prepared to supply from India to Europe, and we will do that, let us say, according to our customers' demand. That is why we are adding our capacities, and we are preparing ourselves to be in a very good position in terms of quality and delivery, because that is the main risk that all the suppliers we can have. I mean, the quality requirements and the delivery requirements on European OEMs are very, very strict, so we need to be well prepared not to fail to them. That is the challenge and that is the reality, and we are optimistic and we are preparing the company to continue growing, both internally, locally in India, and also, of course, with additional exports that we will see happening in the next quarters.
Okay, just one last question. You mentioned about INR 400 crore- INR 500 crore of CapEx in the India entity. That is a step-up, I get that. But even post that, your cash accretion would just further expand, right? And the surplus cash which you have, any color in terms of new products or acquisitions or anything in that?
Yes. This is also, you know that we are in a cash position, as you said, and we have the capability to continue increasing our CapEx and increasing our capacities, and that will be one reality. The second growth area, that could be the inorganic growth, I mean, growing through M&A. We are also active on that field. It's true that it is difficult to close operations in India in this moment. Also, the price and the expectations are very high. But we continue in a very active way to look for potential partnerships where we can grow our business, we can join forces with other players. This is an activity that we are also active. Unfortunately, in the last years, we did not close any operation.
But we continue active on this area, and we would like to have one additional operation, so that will boost also our growth.
Thank you very much, and good luck.
Thank you. Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
I would like to thank you, all the participants, for the questions and the well-directed questions, as always. Very interesting. It was a real pleasure to be with you and to answer, and I hope we answered properly and all our team, because all our team answered properly to your questions. Also, I would like to thank, as always, all CIE Automotive India's team for the great work done in this quarter, and we expect that we will continue doing well and showing good results in the next quarter. Thank you, everybody, and have a nice day.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.