Letter to Shareholders
The human race is facing possibly one of the worst global health crises of the 21stcentury. The Covid-19 pandemic has also had an adverse impact on the global economy. Theeconomic and social disruption caused by the pandemic has devastated tens of millions ofpeople who are at risk of falling into extreme poverty. Millions of enterprises have beenfacing an existential threat with a large section of world's workforce at the risk oflosing their livelihoods.
Covid-19 and the disruptions caused by it are both emotional and economic. Now theissues we are seeing are lockdown induced impact on demand supply-chain issuesavailability of workforce etc. have adversely impacted the Global Electronics SystemDesign and Manufacturing (ESDM) sector also. And we at Centum Electronics too have notbeen spared from this carnage. Many of the sectors that we were catering to like AirlinesDefense Space and Transportation all witnessed significant slowdown.
During this time although there was not a lot that the Company could do to control theexternal existences we introspected and focused on maintaining our sales and marginsmomentum improving our balance sheet strength cash flows and operational efficiencies. Iam happy to inform that we made significant progress on these fronts. We closed thefinancial year ended 2021 with a Consolidated Total Income of Sh Rs. 8232 million withan EBITDA of Rs. out 895 million representing an EBITDA pg Margin of 10.95% and theprofit ar before tax from continued operations Am of Rs. 194 million. On thebalance sheet front there has been a reduction in inventories receivables as well aspayables resulting in a better working capital cycle. We also reduced the debt on ourbooks this year by Rs. 455 million on Centum Electronics - Standalone Balance sheet. Alongwith these improvements we have also implemented sustainable cost-productive measuresthat have resulted in a significant savings in the expenditure levels as compared to theprevious year. Our Engineering services business which is essentially Europe based wasimpacted by the pandemic resulting in low utilization levels is now on a recovery path.Since a low in H1 20-21 we expect to have a better performance of the French Subsidiaryfrom this year onwards.
While we are battling the effects of covid the electronic industry is suffering fromanother problem and that is severe shortages of components and materials. This haseffected the lead times as well as the prices of materials and components. This shortageis having serious disruptions in supply chains across all industries starting withD&A Space Automotive Industrial etc. Lead times which typically were in the rangeof 16 to 20 weeks is now commonly quotes as 40 to 50 weeks. While on one side the demandis strong and we have a strong order book the challenge is fulfilling the demand. Marketreports say this will continue into 2022 also. We are working with our customers andsuppliers to mitigate this risk but revenues for Q1 and Q2 of 21-22 will be impactedbefore we see the results of the mitigating actions we have taken.
While Covid-19 may has created significant challenges it has also acceleratedindustries worldwide to de-risk their manufacturing and supply chain footprint to ensurebusiness continuity. This has resulted in a "China plus One" strategy with Indiabeing a strong contender. Electronics manufacturing has a critical role to play in India'sgrowth story. The Government of India through its Atma- Nirbhar Bharat initiative has beenputting a very high emphasis on growing the ESDM industry by encouraging self-reliance andpromoting various policies to provide an impetus to manufacturing in India including thereduction of corporate taxes PLI Scheme etc. GOI has brought in significant focus onindigenization and procurement or Defence & Aerospace products from India. Toaccelerate this they have brought 101 products under a negative list that cannot beimported and another 108 list of products under a positive list to accelerateindigenization. They are also making structural changes such as d corporatizing theordnance factories to increase the pace of self-reliance. All s theseinitiatives may take some time to fructify but these are all setting a clear I directionfor the way forward which will bring significant opportunities for your Company. To beable to address these significant opportunities the Company has invested and strengthenedits Sales and Marketing efforts.
Centum stands on a strong footing to garner these potentially large upcoming marketopportunities. Shifting global supply chains and our unique value proposition ispositioning your Company on to an ever-promising future and I beckon all our stakeholdersin our journey towards a stronger Centum. I conclude by placing my sincere appreciation toall our stakeholders especially our employees who have put the Company first even duringthe pandemic. Our journey towards excellence remains fueled by your unstinting support andconfidence I thank you for that.
Stay safe Stay healthy and get vaccinated!
Apparao V Mallavarapu.