Motherson Sumi reports solid earnings recovery in September quarter as production improves sequentially

Driven by a faster recovery in global vehicle production, Motherson Sumi Systems Ltd — one of India’s leading automotive component manufacturers — reported a sharp rise in net profit and revenue for the September quarter on a sequential basis. The Noida-based company also managed to marginally exceed the numbers reported in the year-ago period, indicating a strong recovery in business to pre-COVID levels.

Motherson’s consolidated net profit for the quarter increased slightly by 2.7% year-on-year ₹387.9 crore as manufacturing operations across factories across geographies, including India, gained momentum. The company’s profit during the corresponding period a year ago stood at ₹377.73 billion rupees.

Noida-based manufacturer returns to profitability after reporting unprecedented loss ₹1,121.60 crore in the June quarter as auto sales gradually picked up in India, Europe and other developed markets owing to easing of lockdown measures in various countries to improve economic activities.

Most of Motherson’s factories remained closed in April and May due to strict lockdown measures imposed to contain the Covid-19 pandemic.

Operating income down slightly by 1.9% year-on-year ₹14957.21 crore in the quarter as compared to ₹15259.74 crore during the corresponding period. Indicating a solid revival in business, the top line grew by 79.16% month-on-month.

As a result, operating profit before interest, tax, depreciation and amortisation also increased by 15.2% YoY to Rs 1,391.8 crore.

According to the company’s data, 80% of its production plants use more than 75% of their production capacity.

Vehicle production in India rose significantly this quarter as original equipment manufacturers (OEMs) ramped up production to replenish inventory at dealerships.

According to Vivek Chand Sehgal, CEO, Motherson Sumi, the global automotive industry is on the road to recovery from the COVID-19 pandemic and the company has seen an increase in demand across the globe.

“Our teams are prepared to meet the demands of our customers. We believe that this strong momentum will continue in the coming quarters. The operational improvements made by our teams around the world have resulted in improved performance at our plants. Above all, the health of our employees remains our highest priority,” he added.

Automakers and their suppliers reported a rapid improvement in demand and financial performance in the September quarter as retail sales of entry-level motorcycles, cars and tractors rose in rural and urban areas on the back of a bountiful summer harvest, mild monsoons, increased government subsidies and changing consumer preferences for personal mobility to help them avoid infections.

This quarter, Motherson announced a strategy to diversify into sectors such as aerospace, defense and information technology to reduce its reliance on automotive component production.

In October, the company acquired the Electrical Wiring Interconnection Systems business of Canadian company Bombardier Transportation in Mexico.