Mumbai: Engine maker Cummins India Ltd expects exports in 2010 to rise by up to a fifth, but will have to wait for another couple of years for exports to recover fully, a senior official said.
Exports in July-Sept slumped to Rs720 million from Rs3.45 billion in the same period a year ago. Its contribution to Cummins India’s total sales fell to 15% for the period, from nearly half a year ago.
“Exports in the coming quarter may be similar or slightly better. For the next calendar year exports may increase by 10 to 20% in that range-from this year’s levels,” Cummins India chief financial officer Rajiv Batra told Reuters in an interview.
The Pune-based engine maker exports its products mostly to the developed economies such as the US and Europe which have been hit by the global slowdown.
“We export to the developed part of the world. And there we have been experiencing contraction of demand for a while. It will take a couple of years for the cycle to be complete and for us to get back to where we used to be”.
“This quarter (July-Sept) has probably been one of the lowest points in exports.”
The firm last week reported a fall of 6.6% in July-Sept profit to Rs877.4 million, as sales fell 23% to Rs6.08 billion, hit by weak exports.
The company, which makes diesel and gas engines of various sizes to cater to the power, industrial and automotive market, however sees domestic demand on the uptick.
“On domestic business we are very close to our high point, and we will continue growing,” Batra said. “The revival is right across.”
The firm is betting on its power segment which generates more than half of its domestic sales locally and expects the business to grow sequentially as India pushes ahead with reforms in its power distribution network.
The federal government has launched a $10.86-billion (Rs500 billion) plan to cut power distribution losses in the country, with a fifth of the funds devoted to using information technology (IT) at state-run distribution companies.
“About 15% of India is in deficient mode as far as power is concerned so there are strong requirements in this sector,” Batra said.
The debt-free firm- which has cash reserves of close to Rs7 billion will invest Rs1 billion in calendar year 2010 for expansion, he said.
The firm is expanding capacity at a plant near Pune for its line of mechanical and electronic engines.
“Among other projects coming on line is a facility for remanufacturing high horse power products as part of our distribution business,” he said.
Another plant at Kothrud in Maharashtra had been hit by a labour strike from 15 September due to a dispute on wages, but Batra said the firm was able to substantially restore production with the help of non-unionised employees.
Shares of Cummins India closed up 1.4% at Rs380.5 in a Mumbai market that closed 3.09% down.