VARROCNSE29 May 2019

Varroc Engineering Limited has informed the Exchange regarding Investor Presentation for participating in an investor conference organised by Citi Group on 03rd June 2019 at Trident BKC, Mumbai.

Varroc Engineering Limited

Download PDF ↗View VARROC Stock →

Varroc Engineering Limited Regd. & Corp. Office I Tel +91 240 6653600

L-4, MIDC, Industrial Area Waluj, Aurangabad 431 136 M;ih;ir;i~htr11, India

Fax +91 240 2564540

email: varroc.info@varroc.com www.varrocgroup.com

CIN: L2B920MH1988PLC047335

Vdrroc

VARROC/SE/I NT /2019-20/23

May 29, 2019

To,

J The Manager - Listing

The Listing Department, National Stock Exchange of India Limited Exchange Plaza, Plot No. C/1, G Block, Ban·dra-Kurla Complex, Bandra (East), Mumbai-400051.

NSE Symbol: VARROC

Dear Sir/ Madam,

(2) The Managor~'jSting

The Corp9?a;e ~elation Department, BSE Li Phi r e Jeejeebhoy Towers, D al Street, Fort,

rfed

\(M umbai-409001.

BSE Security Code: 541578 Security ID: VARROC

Sub.:

Intimation of participation in Investor Conference.

Ref.: Disclosure under Regulation 30 of Securities and Exchange Board of India (Listing

Obligations and Disclosure Requirements) Regulations, 2015.

Pursuant to Regulation 30(4)(i)(c) of the SEBI (LODR) Regulations, 2015, this is to inform you that, the Company is participating in the following Investor Conference:

Sr. 1

Date* June 03, 2019

Investor Conference Organizer Citi Group

Venue Trident, BKC, Mumbai

*Meeting schedule may change due to exigencies.

The attached presentation will be presented at the said Conference.

Kindly take note of the above.

Thanking you,

Yni 1rc; faithf1 illy, For Varroc Enp,ineerinR Limited

n ('--, I~

K11kilih DirJI Company Secretary & Compliance Officer

Ends.: Investors Presentation.

Q4 & FY19 Results Presentation

Disclaimer

This presentation may include statements which may constitute forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to, statements about the strategy for growth, business development, market position, expenditures, and financial results, are forward looking statements. Forward looking statements are based on certain assumptions and expectations of future events and involves known and unknown risks, uncertainties and other factors. The Company cannot guarantee that these assumptions and expectations are accurate or exhaustive or will be realised. The actual results, performance or achievements, could thus differ materially from those projected in any such forward-looking statements. No obligation is assumed by the Company to update the forward-looking statements contained herein. The information contained in these materials has not been independently verified. None of the Company, its Directors, Promoter or affiliates, nor any of its or their respective employees, advisers or representatives or any other person accepts any responsibility or liability whatsoever, whether arising in tort, contract or otherwise, for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this document or its contents or otherwise in connection with this document, and makes no representation or warranty, express or implied, for the contents of this document including its accuracy, fairness, completeness or verification or for any other statement made or purported to be made by any of them, or on behalf of them, and nothing in this document or at this presentation shall be relied upon as a promise or representation in this respect, whether as to the past or the future. The information and opinions contained in this presentation are current, and if not stated otherwise, as of the date of this presentation. The Company relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. The Company undertake no obligation to update or revise any information or the opinions expressed in this presentation as a result of new information, future events or otherwise. Any opinions or information expressed in this presentation are subject to change without notice. This presentation does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Varroc Engineering Limited (the “Company”), nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or to be relied in connection with an investment decision in relation to the securities of the Company therefore any person/ party intending to provide finance / invest in the shares/businesses of the Company shall do so after seeking their own professional advice and after carrying out their own due diligence procedure to ensure that they are making an informed decision. Neither the delivery of this document nor any further discussions by the Company with any of the recipients shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since that date. This presentation is strictly confidential, unless distributed via a public forum, and may not be copied or disseminated, in whole or in part, and in any manner or for any purpose. No person is authorized to give any information or to make any representation not contained in or inconsistent with this presentation and if given or made, such information or representation must not be relied upon as having been authorized by any person. Failure to comply with this restriction may constitute a violation of the applicable securities laws. The distribution of this document in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. By participating in this presentation or by accepting any copy of the slides presented, you agree to be bound by the foregoing limitations.

Industry Trends in Q4 FY19

-4.9%

-2.5%

-13.5%

5 2 4

0 0

9 5

8 1 0

1 1

6 5

5 0 3

0 8

3 4

0 0 3

2 7

2 4

7 8 7

5 6

7 6

6 6 8

3 5

8 5

• Global Passenger Vehicle

production trend continued its

declining trend in Q4 FY19

E U R O P E

N O R T H A M E R I C A

G R E A T E R C H I N A

• North American market, which

had shown a positive growth in

the first 9 months of FY19, also

declined in Q4

n o i t c u d o r P t e k r a M

s r a C r e g n e s s a P

a b o G

Y o Y n o i t c u d o r P : d n e r T y r t s u d n

I a d n

-9.9%

+7.0%

1 1 6

1 9

9 5

8 2 2

8 9

3 5

0 0 1

4 0 3

1 4 3

5 2 3

-3.7%

9 6 2

4 7

0 1

2 2 6

4 3

0 1

Q4 FY2018

Q4 FY2019

• Domestic Production in Q4 was

very weak with 2W declining

(-9.9%). Passenger Vehicles

continued weak trend (-3.7%)

• Exports for PVs showed a 13.1%

YoY decline; 2W exports

continued to grow but at a

slower pace than in 9M (+2.9%).

3W exports grew by +42%YoY

2 W

3 W

P A S S E N G E R V E H I C L E S

Business Highlights: Q4

• Revenue from Operations for Q4 FY19 up by 5.4% YoY#; FY19 Revenue +18.8%YoY#

•

EBITDA on a like-for-like basis at INR 2,625 Mn*; FY19 EBITDA growth +17.7% YoY*

• PAT for Q4 at INR 1,500 Mn increase of 5.1% YoY; Full year PAT at INR 4,498 Mn, almost

same as last year

• VLS: Strong Q4 Performance in challenging market conditions; margin improved by 90bps YoY to 8.3% on like-for like basis. Normalised EBITDA margin after Ind AS 115 at 10.3%

•

India Business: Revenue growth of 4.7% as against 2W industry decline of 10%; EBITDA margin impacted by slower growth

• VLS: China revenue decline of 32% YoY; share of profit at INR 48 Mn for Q4 as against INR

152 Mn in Q4 FY18

• VLS new business wins of Euro 462 Mn in FY19 at highest ever level; providing strong

visibility for next 3 to 4 years. Significant wins from a few leading OEMs

•

India Business : • TVS : First ever order from TVS; in discussion for multiple product categories • Significant wins from existing customers for new categories including EFI, Catalytic

Convertors, Metallic and Polymer products.

. # Excl. Ind AS 115 impact, revenue from the North America Interior Plastics Business and Excise duty in previous year *on a like-for-like basis, explained in later slides

Varroc Group: Summary Key Financials Q4 & FY19

Particulars

Q4 FY 19

Q4 FY18

Growth (Y-o-Y)

FY 19

FY18

(INR Mn)

Growth (Y-o-Y)

Revenue from Operations - Reported

Revenue from operations : like-for-like

Other income - Operating

Other income - Non operating

EBITDA - Reported *

EBITDA : like-for-like $

EBITDA Margins (%) $

31,534

29,846

31,387

29,772

5.7%

5.4%

1,20,365

1,03,785

1,19,533

1,00,637

16.0%

18.8%

226

3,157 2,625 8.4%

164

2,639 2,633 8.8%

19.6% -0.3%

650

258

11,539 10,260 8.6%

371

9,179 8,715 8.7%

25.7% 17.7%

Share of net profits of JVs under equity method

158

-67.9%

315

690

-54.4%

PBT - reported

PAT - reported

1,480

1,486

-0.4%

5,487

5,158

6.4%

1,500

1,428

5.1%

4,498

4,508

-0.2%

Net Debt to Equity

0.7

0.3

0.7

0.3

*EBITDA = Profit before share of net profits of investments plus depreciation plus finance cost less non-operating portion of other income $ like-for-like excludes impact of Interior Plastics business closure in North America, Ind AS 115 and other items as explained in later part of this presentation

Varroc Group: Business Wise Performance Q4 FY19

Q4 FY19

Q4 FY18

(INR Mn)

SBU

Revenue

Revenue Adjusted*

EBITDA #

EBITDA

Like-for-like % EBITDA Revenue

Revenue Adjusted*

EBITDA #

EBITDA

Like-for-like % EBITDA

Revenue Growth YoY

India Business

10,249

889

8.7%

9,784

9,786

1,104

11.3%

VLS

20,026

19,878

2,175

1,643

8.3%

18,824

18,749

1,396

1,390

7.4%

4.7%

6.0%

Others*

1,498

117

7.8%

1,297

Elimination

(239)

(24)

(60)

123

9.5%

15.6%

Total

31,534

31,387

3,157

2,625

8.4%

29,846

29,772

2,639

2,633

8.8%

5.4%

China JV - 50%

980

117

11.9%

1,438

239

16.6%

-31.9%

Euro Performance for VLS

Q4 FY19

Q4 FY18

SBU

VLS

Revenue

Revenue Adjusted*

EBITDA

EBITDA # Like-for-like

% EBITDA Revenue

Revenue Adjusted*

EBITDA

EBITDA # Like-for-like

% EBITDA

Revenue Growth YoY

249

247

27.1

20.4

8.3%

240

239

17.8

17.7

7.4%

3.5%

Exchange rates : INR/Euro Average for Q4 FY19 = 80.08; INR/Euro Average for Q4 FY18 = 79.11

• •

Excludes Excise Duty, Interiors Business and impact of Ind AS 115 #EBITDA : like-for-like is for continuing operations and excludes impact of interiors business closure in North America and other items as explained in slide no 8

India Business : Financial Performance

Revenue

(INR Mn)

+5%

10,249

9,784

9,786

Q4 FY2018 Reported

Q4 FY2018 Adjusted

Q4 FY2019 Reported

Strong growth across divisions and customers

EBITDA

(INR Mn)

Margin

11.3%

1,104

889

8.7%

889

India Revenue Split by Customer(1)

Q4 FY 2019, %

24.1%

2.9%

4.6%

6.8%

7.2%

Bajaj

Honda

54.3%

Royal Enfield

Yamaha

Mahindra & Mahindra

Others

EBITDA variation analysis

Q4 FY 18 Vs Q4 FY19

Q4 FY2018

Q4 FY2019 Reported

Q4 FY2019 Adjusted

EBITDA margins declined by 260 bps YoY

EBITDA margin impacted due to industry decline & time lag in RM cost increase pass through

Note: (1) Based on management information system database Non-operating portion of other income not considered while calculating EBITDA

88913910918521,104 400500600700800900100011001200Q4 FY2018Revenue ImpactRM ImpactOverheadsImpactOther IncomeImpactQ4 FY2019Global Lighting Business (VLS): Financial Performance

Revenue (1)

(INR Mn)

50% China Joint Venture: Q4 FY 18 Revenue: 1438 Mn INR Q4 FY 19 Revenue: 980 Mn INR

+6%

19,947

19,800

18,824

18,749

Q4 FY2018 Reported

Q4 FY2018 Adjusted

Q4 FY2019 Reported

Q3 FY2019 Adjusted

3.5% YoY revenue growth in Euro terms

EBITDA (1) & Adjusted EBITDA (3)

(INR Mn)

Margin

50% China Joint Venture: Q4 FY 18 EBITDA / Margin: INR 239 Mn / 16.6% Q4 FY 19 EBITDA / Margin: INR 117 Mn(3) / 11.9%

7.4%

2,175

8.3%

+18%

1,643

1,396

1,390

Q4 FY2018 Reported

Q4 FY2018 Adjusted

Q4 FY2019 Reported

Q4 FY2019 Adjusted

Eur Mn

17.8

17.7

27.1

20.4

15.4%YoY EBITDA growth in Euro terms

VLS Revenue Split by Customer(2)

Q4 FY 2019, %

17.4%

20.7%

19.4%

21.9%

9.4%

5.0%

6.3%

Customer A

Customer B

Customer C

Customer D

Customer E

Customer F

Others

VLS EBITDA margin variation explanation on the next page

Note: (1) China JV revenue and EBITDA not included in the reported numbers; (2) Total Revenue break-up in Euro for Q4 FY19 excl VTYC; Customer A is an American multinational car manufacturer, Customer B is a large British car manufacturer, Customer C is an American electric car manufacturer, Customer D is an international automotive manufacturer, customer E is a large European car manufacturer & customer F is a global automotive manufacturer headquartered in Europe (3) Adjusted for closure of Interiors Business in North America, Ind AS 115 impact removed & Excise Duty impact adjusted for VLS India

Global Lighting Business (VLS): EBITDA variation analysis

(Eur Mn)

+15.4%

• Overhead costs contained in spite of higher revenue as a result of ongoing operational

•

efficiency initiatives Launch activity during the quarter was lower as compared to Q4 FY18 and as a result, launch costs were lower by Eur 3.9mn on a comparable basis

17.7 20.4 27.10.1 2.2 -0.6 -4.3 1.0 3.9 5.0 17.8 10121416182022242628Q4 FY2018DiscontinuedInterior PlasticsBusiness in NAQ4 FY2018:Like-for-LikeRevenue impactRM impactOverheadsimpactOther incomeimpactQ4 FY2019:Like-for-LikeStart-up Costs notcapitalised : Brazil,Morocco & PolandetcLaunch relatedcosts (lower thanQ4 FY18)Ind AS 115 impactQ4 FY2019:ReportedVarroc Group: Business Wise Performance FY19

FY19

FY18

(INR Mn)

SBU

Revenue

Revenue Adjusted*

EBITDA #

EBITDA

Like-for-like % EBITDA Revenue

Revenue Adjusted*

EBITDA #

EBITDA

Like-for-like % EBITDA

Revenue Growth YoY

India Business

42,744

4,623

10.8%

36,508

35,555

3,872

10.9%

20.2%

VLS

Others

72,668

71,837

6,385

5,106

7.1%

63,211

61,017

4,911

4,447

7.3%

17.7%

5,485

604

11.0%

4,278

399

9.3%

28.2%

Elimination

(533)

(72)

(212)

(3)

Total

1,20,365 1,19,533

11,539

10,260

8.6%

1,03,785 1,00,637

9,179

8,715

8.7%

18.8%

China JV - 50%

4,735

579

539

11.4%

6,144

958

15.6%

-22.9%

Euro Performance for VLS

FY19

FY18

SBU

VLS

Revenue

Revenue Adjusted*

EBITDA

EBITDA # Like-for-like

% EBITDA Revenue

Revenue Adjusted*

EBITDA

EBITDA # Like-for-like

% EBITDA

Revenue Growth YoY

897

887

7.1%

838

809

7.3%

9.6%

Exchange rates : INR/Euro Average for FY19 = 80.94; INR/Euro Average for FY18 = 75.45

• •

Details on Capex for New Facilities and Revenue Potential

Facility

Estimated Capex (Eur Mn)

Full Revenue potential (Eur Mn)

Full potential sales year

Confirmed orders as of March 2019 to meet the peak revenue and other details on capex

Brazil

Morocco

Poland

Chennai

VLS-ELBA JV*

Czech Capacity Expansion Associated

Czech program growth/technology

Bulgaria

Total Capex incurred on these activities in FY19

*The JV revenue will get eliminated during consolidation.

199

~75% sourced business

~70% sourced business

~55% sourced business

~60% sourced business

•

• • •

This will benefit our procurement / external revenue is a small portion

This is a capex towards construction of building

Capex is towards growth, automation for new programs, Engineering CoE, New building and upgradation of current facilities. Incremental Revenue of upto 80 mn Capex already incurred in FY19 This will also support Poland plant

180

200

FY23

FY23/FY24

FY24

FY23/FY24

FY22

620

FY23

Highlights of Major Order Wins and Near Term Potential Business FY New Business wins: VLS / Recent orders: India Near term potentials

Overall Net Business Wins of Eur 462 Mn - New Business wins - Eur 228 Million - Re-wins (net of lost business) - Eur 234 Mn - China Business wins - Eur 62 Mn (including new business of 50 Mn mainly from VW/Geely) Break-up of Business win by customer -VW - Eur 122 Mn -Ford - 110 Mn -Tesla – 69 Mn -PSA – 33 Mn -GM – 30 Mn -RN – 27 Mn -JLR -11 Mn -Others – 36 Mn

TVS : Won orders for Magneto; The order is likely to start in Q3 FY20. FY21 business is ~INR 450 Mn Hero: Won orders for BS VI Crankpin. VECV: Orders of INR580 Mn VW: New business won on Roof rails and 2K injection molding for inline parts 2020 launch Bajaj: New business of INR350 Mn / total wins INR2400 Mn in Q4

VLS

India

VW is set to become our second largest customer in FY20 & the largest in FY21. Tesla: In discussion for future models GM: Major order confirmed re-opening the door with this key customer for the Americas region Hyundai: Business award with Hyundai in Turkey; potential to increase presence Daimler: Business wins in India China: Focus on locally strong players like Geely, VW- FAW expected to improve performance in near term.

In discussion with TVS for more product categories. In addition, significant value LOIs expected for two products from Hero in June Traction Motor & Controller: development in progress. Prototypes ready for 2W & development work is ongoing for 3W; in discussion with a customer Catalytic Convertor: Business confirmation received from two customers; business potential INR 3500 Mn in FY21 post BS VI implementation Polymer products for VW: Working with VW group for few more polymer products

R & D / Business Updates – Q4 FY19

Global Lighting Business • Opened new Engineering Centre in Krakow, Poland (pictures on page 14)

• Workspace for 120 employees; located in city center, with close proximity to two largest

technical universities in Poland

• Office includes space for mechanical, optical and electronic (hardware/software) engineering

•

Electronics laboratory, and ESD protected workstations

• Office will also be used as focal point for Global Purchasing Team

• Driving Vision News (DVN) Conference in Shanghai, China

•

Together with our JV VTYC, VLS actively participated with 2 lectures and a technology demonstration at the DVN Conference in Shanghai, China

• VLS presented the advantages of cost effective Adaptive Driving Beam (ADB) headlamp

technologies, and how they can be best applied in the growing Chinese market.

•

These highly efficient ADB systems, match perfectly with China’s accelerated implementation of Electric Vehicles due to their lower power consumption, without sacrificing safety and performance.

R & D / Business Updates – Q4 FY19

Polymer •

Consistently improving our FSS capability and strengthening team - we will be developing majority of interior parts ( Door trims / console /pillars etc) for a major OEM launch in 2020

•

Commissioned the only 3500T molding machine in central India for front facia of Trucks

Electrical •

Integrated Starter Generator (ISG) ready for customer evaluation

•

TFT cluster program prototype to be ready by July 2019

Instrument Cluster – 4 Wheeler – Readiness with Proto Sample by Q2

Instrument Cluster – 2 wheeler with Turn by Turn Indication – Readiness with Proto Sample by Q4

New R&D Facility – Krakow, Poland

Facility picture

Office Opening function

Office Area

Office Building

Poland Manufacturing Plant : Const. Status

Roof insulation and proofing, skylights

Manufacturing Area – inside view 1

Side Wall – Manufacturing Area

Manufacturing Area – inside view 2

Thank

You

← All Transcripts VARROC Stock Page →

Varroc Engineering Limited has informed the Exchange regarding Investor Presentation for participating in an investor conference organised by Citi Group on 03rd June 2019 at Trident BKC, Mumbai.

Market Movers