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earnings | IST

Steel, aluminium prices impacted margins in Q2; chip shortage remains a concern: Endurance Tech

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Ramesh Gehaney, Executive Director & COO, Endurance Technologies, is of the view that the chip shortage situation may not improve till the end of FY22. He further said that production got dented due to this shortage. He also mentioned that surging prices of raw materials affected margins in Q2.

Endurance Technologies posted a weak operational performance in Q2. Profits were down 20 percent and margins slipped 390 basis points on a year-on-year basis. India business for the company did better but the European business was impacted because of chip shortage.
Ramesh Gehaney, executive director and COO of the company, said, “The European situation has not improved and the challenges continue to remain the same. People are switching off production because of semiconductor shortage issue. The October indications are that the new car registrations are down 20-33 percent as far as Europe and UK are concerned.”
He further mentioned, “The signals are that probably November, December and January would be better because we have some insight that the chip condition or the semiconductor issue would ease out. Moreover, the challenges are multiplying because of the switchover from normal petrol and diesel engines to EVs (electric vehicles) and hybrid models, that would mean more demand for semiconductors and that is where the challenges are higher.”
Gehaney believes that the allocation for the auto industry may probably increase. “As far as microprocessors are concerned, what I hear from the news is that it is not going to improve till the end of FY22,” he said.
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On margins, Gehaney said, “It is not going to get any worse because the steel prices have started stabilizing. The impact on margin was mainly because of the commodity price increases-aluminium has gone as high as Rs 50 per kg which is a lot of money, about 42 percent over the existing price, and steel prices were on similar grounds. Although steel prices have stabilized now, aluminium prices continue to go up. So, margins would remain under pressure. But if you look into Endurance’s performance in absolute value terms, we have increased our profits by almost 55 percent.”
Talking about the deals in the EV space, he said, “The company was actively involved with all the EV OEMs as far as Ather and Ola were concerned and we have been able to procure orders with Ather. The company has also started supplies for Bajaj.”
 
For the full discussion, watch the accompanying video