Motherson Q2 net slides on restructuring, forex

Motherson Q2 net slides on restructuring, forex

Mumbai: Auto parts maker Motherson Sumi Systems Ltd’s quarterly profits slid 65% despite a surge in sales, hit mainly by a restructuring charge related to closure of two plants, and exchange fluctuations.

The company reported a consolidated net profit of Rs149.6 million on net sales of Rs15.88 billion in July-Sept. This compares with a profit of Rs423.1 million on sales of Rs6.20 billion a year ago.

A Reuters poll had forecast a consolidated net profit of Rs326 million on sales of Rs14.91 billion.

Earnings were hit include by a restructuring charge of about Rs229 million rupees related to the closure of two plants in Australia and Europe, chief financial officer G.N. Gauba said.

The plants were under Samvardhana Motherson Reflectec (SMR), originally European Visiocorp’s rear view miror business that Motherson acquired in March.

“They are incurring these one-time expenses to reduce the additional costs they might have to pay, going forward. That will be reduced and accordingly margins will improve in FY11," said Vaishali Jajoo, analyst at brokerage Angel Broking.

“We do not have a significant restructuring cost coming in the next quarter, the major restructuring that we had envisaged at the time had been completed," Gauba said.

“Exchange fluctuations on foreign currency convertible bonds worth about Rs191 million also had an impact," Gauba said.

Separately, the firm said SMR won orders worth around €200 million (Rs14 billion) from a European car maker to supply rear view mirrors for a model to be launched in 2,011.

In August SMR had won orders worth Rs34.9 billion from major European carmakers including Volkswagen and BMW.

“There had been a situation that Visiocorp had been in financial distress, so orders were withheld by carmakers. Once we took over, customers are showing confidence and have started placing their orders," Gauba said.

Shares of Motherson Sumi ended up 1.95% at Rs112.20 in a weak Mumbai market.