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earnings | IST

Varroc Engg using chip shortage situation to rejig operations; expects domestic demand to pick up

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The company is doing their best to manage the chip shortage situation and are also using it as an opportunity to restructure the operations and make it more robust, and a solid foundation for the future, said TR Srinivasan, Group CFO, Varroc Engineering. He also expects demand to pick up in the domestic market.

Varroc Engineering posted a net loss in Q2. The year-on-year (YoY) revenues during the quarter under review were up 4 percent at Rs 3,032 crore versus Rs 2,916 crore. YoY EBITDA loss was of Rs 6 crore versus profit of Rs 266 crore; and net loss of Rs 297.2 crore versus loss of Rs 38.8 crore in the year-ago period.
In an interview with CNBC-TV18, TR Srinivasan, Group CFO, Varroc Engineering, said, “It was a difficult quarter but there are early signs that things may be just starting to stabilize in terms of semiconductors. However, any meaningful recovery in terms of the supply situation and the resultant increase in volumes is still not expected, at least for the next couple of quarters. However, people are expecting some meaningful recovery towards the end of the first quarter of calendar 2022.”
When asked if losses for the company would continue in the second half, he said that the company is doing all it can to contain the losses and turn it around. “There are a number of initiatives we have taken including Project RACE (rapid achievement of competitive edge), which is making good progress in European operations. So, the intention is definitely to bring the losses down and stop the bleeding. The Indian business continues to do well and we expect the demand to pick up in the domestic market as well in the coming quarters, which should help us overall,” said Srinivasan.
For the European operations, the company in the first half saw an EBITDA loss of Rs 180 crore. Stating the reasons for the same, Srinivasan said, “The overall passenger vehicle volumes in Europe specifically, there was a 40 percent decline in production volumes in Q2 on a year-on-year basis. So that is the kind of impact the semiconductor shortage has had on the overall OEM volumes, and as a tier-I competent supplier, obviously, we got impacted.”
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This is something which nobody really expected to be severe, and it is now starting to impact even other sectors like electronics, computers, mobiles, he shared.
However, we are doing our best to manage and are also using it as an opportunity to restructure the operations and make it more robust, and a solid foundation for the future, he added.
For the full interview, watch the accompanying video