Varroc Engg falls as Q1 PAT falls 38% YoY to Rs 34cr | Capital Market News

Last updated: August 7, 2024 | 16:31 IST

Shares of Varroc Engineering fell 3.16 per cent to Rs 584.75 after the company’s consolidated net profit (from continuing operations) declined 38.09 per cent to Rs 34.07 crore in Q1FY25 as against Rs 55.03 crore reported in Q1FY24.

The company’s profitability was impacted by negative operating leverage in its overseas operations and the costs of setting up two new plants in Maharashtra.

However, revenue from operations rose 5.16% to Rs 1,898.85 crore for the quarter ended June 30, 2024.

Profit before tax (from continuing operations) during the first quarter of FY25 stood at Rs 55.99 crore, down 14.18 per cent as compared to Rs 65.24 crore reported in the first quarter of FY24.

EBITDA stood at Rs 172.4 crore in the June quarter, down 4.3% YoY. EBITDA margin declined to 9.1% in Q1FY25, compared to 10% recorded in the corresponding quarter of the previous year.

The company’s revenue from automotive business stood at Rs 1,859.89 crore (up 6.24% YoY), while revenue from other segments stood at Rs 38.96 crore (down 29.11% YoY) during the period under review.

Tarang Jain, CMD said that in Q1 FY25, strong domestic macroeconomic factors resulted in most of the automotive segments growing year-on-year, except for the commercial vehicle segment. 2W grew by 19.6%, 3W grew by 9.4%, PV grew by 5.8% and CV fell by 1.4%. However, on a quarter-on-quarter basis, we saw a decline in growth in almost all segments except 2W, mainly due to the cyclical nature of the industry. 2W grew by 6.1%, 3W fell by 1.4%, PV fell by 10.3% and CV fell by 13.4%.

Overseas markets, especially the US and European markets, also showed negative growth for 2W. In the ASEAN region, growth was largely driven by the low-end segments, while the premium segment continues to struggle for growth in the region. In Q1 FY25, the company reported revenues of Rs 18,989 million with a year-on-year growth of 5.2%. The Indian business grew by 11.3%.

In Q1FY25, our new business wins stood at over Rs 795.9 crore. Cumulative order wins are expected to lead to full-year peak revenue levels of around Rs 141.6 crore. Almost 48% of our business wins during the quarter came from EV players. Our revenue from shipments to EV players in Q1FY25 was around 8% of our total revenue.

We continue to exercise prudence in capital allocation and closely monitor working capital and capex. This has led to a further reduction in net debt by Rs.668 million in Q1 FY25 and our net debt to equity ratio has improved to 0.59. Furthermore, we continue to work on initiatives to achieve cost reduction across several cost categories. We are also implementing various initiatives in overseas markets to also reduce input and fixed costs.

The first phase of our renewable energy initiative is expected to deliver 36.6 MWp of solar energy from the second quarter of this year, underscoring our commitment to sustainability. The Board has also approved a second phase of an additional 14.00 MWp this fiscal year.

Varroc Engineering designs, manufactures and supplies exterior lighting systems, plastic and polymer components, electrical and electronic components and precision metal components directly to manufacturers of passenger cars, commercial vehicles, two-wheelers, three-wheelers and off-road vehicles (“OHV”) worldwide.

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First published: August 7, 2024 | 16:23 IST