Mumbai: Sakthi Sugars Ltd sees its auto parts unit contributing 60% to consolidated sales in 2008/09 on overseas acquisitions, a move that will lessen its vulnerability to the cyclical sugar market, a top official said.
Its auto parts unit, which counts Robert Bosch , and TRW as customers, is expected to earn revenue of Rs20 billion next year, up from Rs14 billion in the year to June 2008, M.Manickam, managing director, said on Friday.
“True, our auto ancillary is growing much faster than our other divisions. Our acquisitions have designed it that way,” he said, over telephone from the firm’s headquarters at Coimbatore in southern India. Sugar miller Sakthi, which has bought two European companies for more than Rs6 billion since April, is not actively considering any other acquisition currently, he said, adding the auto parts unit will remain a subsidiary “for now.”
It bought Swedish auto-parts firm Arvika Gjuteri for an enterprise value of Rs3 billion in February and INTERMET Europe for $130 million in April 2007.
Auto parts accounted for a fifth of sales in 2006/07, which is expected to rise to 50% in the current year, Manickam said. “The demand is strong in India and Europe, we hope to sustain the pace.”
He added the loss-making sugar division should turn to profit in less than six months, helped by rising global sugar prices.
The sugar division has a capacity to crush 18,000 tonnes of cane a day, a 120 megawatt power plant and 120 kilolitres a day distillation unit.
Sakthi posted a loss of Rs274.5.9 million in the quarter to December 2007, hit by low sugar prices. However, sugar prices have rebounded on expectation of rising demand from cold beverage and ice-cream makers in summer.
Earlier this week, London white sugar futures touched 15-week high and Indian futures rose 8.2% but fell on Thursday.
Shares in the firm were trading 7% down at Rs65.40 in a week Mumbai market.