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Elgi Equipments Ltd.

BSE: 522074 Sector: Engineering
NSE: ELGIEQUIP ISIN Code: INE285A01027
BSE 00:00 | 22 Oct 200.65 -0.05
(-0.02%)
OPEN

201.40

HIGH

203.95

LOW

200.20

NSE 00:00 | 22 Oct 200.85 -0.10
(-0.05%)
OPEN

201.80

HIGH

204.35

LOW

200.00

OPEN 201.40
PREVIOUS CLOSE 200.70
VOLUME 5059
52-Week high 244.00
52-Week low 103.40
P/E 46.02
Mkt Cap.(Rs cr) 6,359
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 201.40
CLOSE 200.70
VOLUME 5059
52-Week high 244.00
52-Week low 103.40
P/E 46.02
Mkt Cap.(Rs cr) 6,359
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Elgi Equipments Ltd. (ELGIEQUIP) - Chairman Speech

Company chairman speech

ELGI EQUIPMENTS LIMITED ANNUAL REPORT 2008-2009 CHAIRMAN'S REPORT This year under review witnessed high volatility in business with the global economic slowdown having a significant impact in the second half. The compressor business grew in sales and profits whereas the automotive business had a setback with recession in the industry. The compressor business grew on the back of strong performance across all segments but the performance was well below budgeted levels. During this year the company had established two overseas subsidiaries in China and Sharjah. COMPRESSORS The compressor business accounted for 85% of the total sales of the company. This business accounts for 96% of the profits of the company and 86% of the capital employed by the company. This business presently employs 1002 people. It contributes to 89% of the international business of the company. This year this business grew by 13% PERFORMANCE In spite of sluggish market conditions rotary compressor segment managed to record a healthy growth. This was possible due to focused initiatives in select geographic and product segments. The recip segment maintained its growth trend in select verticals. The Construction and Mining segment sustained its performance during this year. Investments into capacity in water well segment extended this year as well though the peak capacity has not yet been reached. The international business grew by 10%. Growth was mainly in the first half of the year with the recession world wide significantly impacting the business during the second half. As part of our long term plans to be present in key high potential markets, we have established a wholly owned sales and manufacturing company in China and a sales and service company in the Middle East. The after market segment which continues to be a key focus for the company has grown by 19%. The company is moving towards achieving global levels in after sales service revenue. OPPORTUNITIES Taking into account the global slowdown, the company is exploring various organic growth opportunities by developing new products to meet market needs. Our factory in China has commenced production towards the end of this year and expected to start billing locally manufactured units. Our sales and service company in the Middle East commenced warehousing and billing to customers since November 08. As per our plans we are in the process of incorporating our company in Brazil to serve the growing market there. THREATS The year has seen continued influx of compressor companies leading to technology and pricing pressure. Through appropriate global sourcing and focused product development efforts the company is combating the situation. With commodity prices and foreign currencies being volatile under the recessionary circumstances, pricing and margins will continue to be a challenge. International market is going through turbulent times leading to growth challenges in export of our products and our global plans. ATS - Elgi The automotive equipment business accounted for 13% of the total sales of the company. This business accounts for 4% of the profits of the company and 14% of the capital employed by the company. The business employs 280 people. It contributes to 5% of the international business of the company. PERFORMANCE The automotive industry faced severe challenges during the year driven by reduced demand. The sales of all segments of vehicles witnessed dramatic reduction. As a consequence almost all verticals of business witnessed tough conditions. Considering the above challenges we increased our emphasis on products such as wheel service equipment, AC recovery units, simulators and mobile service units. In addition we tapped new opportunities in equipments such as Nitrogen tyre inflator, high end lifts from MAHA Germany, hydraulic lifts and positioned them in the right market to fetch substantial success. Our efforts helped us in offsetting the demand reduction in other segments. During the year we gave special emphasis on training of our channel partners to improve the customer service. This helped us to reduce the time taken to restore any product in case there is a failure. Our toll free service helped our customers book their calls. At the same time our liaison and networking with the OEM`s increased manifold, this helped a lot in our business development activity. OPPORTUNITIES The demand for vehicle servicing is bound to go up as the population of cars rises. A certain amount of skepticism prevails among the garage fraternity on investments into new garages, especially in this period of economic slow down. This year few manufacturers who have plans for mega launch of new car models are expected to expand their service infrastructure. During the year we have set plans to increase our sales in the wheel service equipment business through the tyre shops as well as mobile service units in the construction and mining segment. Our plan is to increase our market share substantially in these business areas. In addition we would be giving special attention to lifting equipments. We have a number of new products planned for launching during the current year mainly for improving the productivity and saving the running cost of garages. Many of these products are presently under field validation and would be progressively launched in the market. The company is also exploring opportunities to increase service revenue. THREATS While entry of global players into India continues to hamper the growth opportunities, the focused regional players are gaining foothold in the market by being closer to the customer and cost competitive. Introduction of low cost cars such as Nano is creating new challenges to meet customer needs at lower price points. MANUFACTURING ENGINEERING The business involves providing engineering services and manufacturing of parts to customer's world wide. This business generated revenue of 108 million. The business employs 109 people. The capital invested in the business is 25million which represents 1% of the total capital employed by the company. International business of this division contributes 10% of the total exports. The business grew by 56%. OPPORTUNITIES The global companies continue to be under severe pressures to bring down costs due to shrinking demand and volatile commodity prices. The cost reduction initiative by these companies to combat the situation continues to provide interesting opportunities for this business. The challenge is to tap the right product at right that meets our capability and infrastructure. Our focus continues to be on low volume high variety parts which provide better margins than high volume manufacturing. THREATS The complexities involved in manufacturing of low volume high variety products pose many challenges in scaling and growing this business. The global demand softening, volatile oil and commodity prices and pressure from other cost competitive countries clearly are the threats the business is faced with. OVERALL PERSPECTIVES We would not be helping ourselves if we call the economic situation as recession. This should be considered more of a structural correction of demand after too many years of leveraged consumption. There is enormous uncertainty about the depth and duration of the current situation. Managing the business for cash combined with cost control measures will be the focus in the coming year considering the existing uncertainties. Our initiatives to develop the competencies of our blue collar employees has started paying dividends. The objective is to be able to find first line leaders from this pool of talent. The time being ripe for acquisition we are seriously exploring opportunities through acquisition of compressors or compressor related businesses. We are in the process of exploring opportunities to test our model that we have established. Based on the success we would scale up this method of growth. Our plan of finalizing the land for building new premises for our factory is under final stages and we hope to initiate the steps during the ensuing year. The capital budget for the next year has been finalized at 367 million. Out of this 351 million is for the compressor business, 12 million is for ATS-Elgi and 4 million is for the manufacturing engineering business. The bulk of the budget planned is highly tentative in nature and would be activated only if demand conditions pick up. We will be focusing on three critical aspects that this slow down is presenting as opportunities for improvement. They are cost, quality and cash. Strong product range combined with our customer engagement model and Elgi's business systems would enable us to leverage our facilities and people to much higher levels. Coimbatore L.G. VARADARAJULU Date : 30.04.2009 Chairman
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