Varroc Engg Q4 net loss widens to Rs 144 cr

On a consolidated basis, Varroc Engineering reported net loss of Rs 144.32 crore in Q4 FY21, higher than net loss of Rs 137.10 crore in Q4 FY20.

Net sales jumped 31.9% to Rs 3,619.26 crore in Q4 FY21 from Rs 2,744.75 crore in Q4 FY20. Pre-tax loss stood at Rs 117.76 crore in Q4 FY21 as against a pre-tax loss of Rs 136.72 crore in Q4 FY20.

EBITDA climbed 11.3% to Rs 127.51 crore compared with Rs 114.58 crore in the corresponding period of previous year. EBITDA margin declined to 3.5% in Q4 FY21 as against 4.2% in Q4 FY20, mainly due to weaker margins in Global Lighting Business (VLS).

VLS margins were impacted due to semi-conductor shortages leading to key customer OEMs shutting plants/ reducing volumes with negative impact on volumes at the company's established profit-making plants (Mexico and Czech Republic); continued losses in new plants in Poland and Morocco as volume ramped up slower than expected; increase in raw material costs due to commodity price increases in semi-conductors, resin etc. not offset by corresponding increases in selling prices; and exceptional items (premium freight debited by a customer etc).

Tarang Jain, the managing director (MD) of Varroc Engineering, commented: "We have seen a strong recovery in two-wheeler and passenger vehicle volumes across in India in Q4 FY21. The global (ex-China) passenger vehicle volumes in Q4 FY21 declined mainly due to severe semi-conductor shortages. As the current demand for chips is continuing to outstrip supply, suppliers are adding capacities. This additional capacity is expected to help meet auto sector demand starting end of Q2 FY22. During this challenging external environment, our focus will be to steadily improve the margins in our VLS business on a sustainable basis in the coming quarters. In this direction, we have launched project RACE to bring VLS profitability in line with industry benchmarks."

Meanwhile, the company's board has resolved to seek enabling approval from the shareholders by way of special resolution at the ensuing AGM for issuing secured/unsecured redeemable non-convertible debentures for an amount not exceeding Rs 500 crore in the financial year, in one or more series/tranches, denominated in Indian rupees or in any foreign currency on a private placement basis.

Varroc Engineering is an automotive component maker. It designs, manufactures and supplies exterior lighting systems, plastic and polymer components, electricals-electronics components, and precision metallic components to passenger car, commercial vehicle, two-wheeler, three-wheeler and off-highway vehicle OEMs directly worldwide.

Shares of Varroc Engineering rose 0.71% to end at Rs 433.05 on Friday, 4 June 2021.

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