A Study of Motor Industries Company
Motor Industries Company (MICO) held its 51st Annual General Meeting on 8th May, 2003 at Bangalore.
MICO is India's largest auto-ancillary company. German-based Robert Bosch group hold 60.5% after the company brought back its shares in February 2002.
The company is the pioneer of automotive Spark Plugs and Diesel Fuel Injection Equipment in India. It had been bearing the brunt of the recession in the tractor and commercial vehicle (CV) segment in the past few years. However the, sharp recovery in sales of CV in FY 2002 has compensated for the continued fall in tractor sales.
For the full year ended Dec. 2002, the company had registered a growth of 7% in sales to Rs 1550.71 crore. This was achieved mainly due to the better performance in the quarter ended June 2002 and Sept. 2002.
Net profit after adjusting for EO expenses rose 64% stood at Rs 134.06 crore. Very recently, Andreas Nobis, managing director of the company has taken over new responsibility in Robert Bosch GmbH with effect from 1st May 2003 to oversee the recent acquisition and integration of Buderus AG and hence could not attend the AGM.
Robert Bosch has entered into an agreement to buy 30.2% of the share capital of Buderus AG in addition to 17% already held by the company. The successor to Andreas Nobis is expected to be known at a later date.
MICO registered a 104% jump in bottom line to Rs 52.29 crore for the first quarter ended March 2003. Net sales during the quarter rose 17% to 432.08 crore.
In continuation of the strategy to boost exports, focused efforts were made to get additional business from Robert Bosch, Germany.
This led to a significant 29% growth in exports during the year, accounting for 16% of total turnover. From this, MICO expects to touch 20% in three years. Its spark plug business is growing in the US and expects an increase in turnover from new products, from the common rail system and the Electronic control units, which are based on the Euro II norms and potential navigation systems from Blaupunkt.
The Union Budget 2003-04 is also positive for the sector as it has increased its thrust on infrastructure (especially roadway) projects, which is sure to usher in increased demand for the CV sector especially in the multi-axle segment.
Performance of the Company
The recovery in the automotive sector, led by the strong growth in commercial vehicles segment has enabled the Company’s sales turnover to rebound in 2002.
The overall sales turnover of the Company grew by around 7%. Despite sales declining by 7% in the 1st quarter 2002 over the 1st quarter 2001, quarter 2 and quarter 3 showed an increase of 21% and 14% respectively. This, together with a steady 4th quarter, enabled the Company to post the 7% growth in sales for the entire year.
Sales to OEMs, which constitute nearly 45% of the total sales, increased by 6.8%. This growth was mainly due to increase in volumes of Multi Cylinder Pumps, Nozzle Holder Assemblies, Starters and Alternators.
The general decline in the service business of the transport sector led to a fall in demand for fuel injection components in the Aftermarket. In spite of all counter measures, overall sales in this area declined by 3.6% as compared to 2001.
In continuation of our strategy to boost exports, focused efforts were made to get additional business from Robert Bosch, Germany. This has led to a significant 29% growth in exports during the year, accounting for 16% of total turnover.
The non-automotive businesses comprising of Power Tools and Packaging Machines, grew by 18% due to a strategic marketing thrust and introduction of new products such as "Marble Cutters" and "Terra 25" packaging machines.
Cost cutting has now become integral to staying competitive. During the year, cost reduction measures such as strict control on additions to fixed assets, programs for rationalization and reduction of asset base, reduction in material cost through import substitution, rationalization of supplier base, improvement in labour productivity, budgetary control on overheads, etc. were further intensified.
This has significantly contributed to an improvement in operational efficiency. As a result of growth in sales accompanied by the various cost reduction initiatives, the Profit Before Tax increased by more than 50% and stood at Rs. 200.5 crore.
The Profit After Tax also increased by more than 60%. After taking into account the proposed dividend and transfer to capital redemption reserve, an amount of Rs. 90 crore is proposed to be transferred to general reserve, retaining a balance of Rs. 29.3 crore in the Profit & Loss Account.
In 2002, the investments in fixed assets amounted to Rs. 94 crore, accounting for 6.1% of sales, as compared to Rs. 1,13.3 crore in 2001, which accounted for 7.8% of sales. 94% of the total investments made in 2002 are in Plant and Machinery.
Of this 34% is for new products, 26% for quality improvement, 9% for R&D activities and the balance 31% for auxiliary and other services
Motor Industries Company (MICO) held its 51st Annual General Meeting on 8th May, 2003 at Bangalore.
MICO is India's largest auto-ancillary company. German-based Robert Bosch group hold 60.5% after the company brought back its shares in February 2002.
The company is the pioneer of automotive Spark Plugs and Diesel Fuel Injection Equipment in India. It had been bearing the brunt of the recession in the tractor and commercial vehicle (CV) segment in the past few years. However the, sharp recovery in sales of CV in FY 2002 has compensated for the continued fall in tractor sales.
For the full year ended Dec. 2002, the company had registered a growth of 7% in sales to Rs 1550.71 crore. This was achieved mainly due to the better performance in the quarter ended June 2002 and Sept. 2002.
Net profit after adjusting for EO expenses rose 64% stood at Rs 134.06 crore. Very recently, Andreas Nobis, managing director of the company has taken over new responsibility in Robert Bosch GmbH with effect from 1st May 2003 to oversee the recent acquisition and integration of Buderus AG and hence could not attend the AGM.
Robert Bosch has entered into an agreement to buy 30.2% of the share capital of Buderus AG in addition to 17% already held by the company. The successor to Andreas Nobis is expected to be known at a later date.
MICO registered a 104% jump in bottom line to Rs 52.29 crore for the first quarter ended March 2003. Net sales during the quarter rose 17% to 432.08 crore.
In continuation of the strategy to boost exports, focused efforts were made to get additional business from Robert Bosch, Germany.
This led to a significant 29% growth in exports during the year, accounting for 16% of total turnover. From this, MICO expects to touch 20% in three years. Its spark plug business is growing in the US and expects an increase in turnover from new products, from the common rail system and the Electronic control units, which are based on the Euro II norms and potential navigation systems from Blaupunkt.
The Union Budget 2003-04 is also positive for the sector as it has increased its thrust on infrastructure (especially roadway) projects, which is sure to usher in increased demand for the CV sector especially in the multi-axle segment.
Performance of the Company
The recovery in the automotive sector, led by the strong growth in commercial vehicles segment has enabled the Company’s sales turnover to rebound in 2002.
The overall sales turnover of the Company grew by around 7%. Despite sales declining by 7% in the 1st quarter 2002 over the 1st quarter 2001, quarter 2 and quarter 3 showed an increase of 21% and 14% respectively. This, together with a steady 4th quarter, enabled the Company to post the 7% growth in sales for the entire year.
Sales to OEMs, which constitute nearly 45% of the total sales, increased by 6.8%. This growth was mainly due to increase in volumes of Multi Cylinder Pumps, Nozzle Holder Assemblies, Starters and Alternators.
The general decline in the service business of the transport sector led to a fall in demand for fuel injection components in the Aftermarket. In spite of all counter measures, overall sales in this area declined by 3.6% as compared to 2001.
In continuation of our strategy to boost exports, focused efforts were made to get additional business from Robert Bosch, Germany. This has led to a significant 29% growth in exports during the year, accounting for 16% of total turnover.
The non-automotive businesses comprising of Power Tools and Packaging Machines, grew by 18% due to a strategic marketing thrust and introduction of new products such as "Marble Cutters" and "Terra 25" packaging machines.
Cost cutting has now become integral to staying competitive. During the year, cost reduction measures such as strict control on additions to fixed assets, programs for rationalization and reduction of asset base, reduction in material cost through import substitution, rationalization of supplier base, improvement in labour productivity, budgetary control on overheads, etc. were further intensified.
This has significantly contributed to an improvement in operational efficiency. As a result of growth in sales accompanied by the various cost reduction initiatives, the Profit Before Tax increased by more than 50% and stood at Rs. 200.5 crore.
The Profit After Tax also increased by more than 60%. After taking into account the proposed dividend and transfer to capital redemption reserve, an amount of Rs. 90 crore is proposed to be transferred to general reserve, retaining a balance of Rs. 29.3 crore in the Profit & Loss Account.
In 2002, the investments in fixed assets amounted to Rs. 94 crore, accounting for 6.1% of sales, as compared to Rs. 1,13.3 crore in 2001, which accounted for 7.8% of sales. 94% of the total investments made in 2002 are in Plant and Machinery.
Of this 34% is for new products, 26% for quality improvement, 9% for R&D activities and the balance 31% for auxiliary and other services