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Enkei Wheels India Ltd.

BSE: 533477 Sector: Auto
NSE: N.A. ISIN Code: INE130L01014
BSE 15:26 | 07 Dec 352.10 2.70
(0.77%)
OPEN

359.95

HIGH

360.00

LOW

348.10

NSE 05:30 | 01 Jan Enkei Wheels India Ltd
OPEN 359.95
PREVIOUS CLOSE 349.40
VOLUME 3937
52-Week high 438.95
52-Week low 223.50
P/E 58.01
Mkt Cap.(Rs cr) 633
Buy Price 352.10
Buy Qty 79.00
Sell Price 357.00
Sell Qty 30.00
OPEN 359.95
CLOSE 349.40
VOLUME 3937
52-Week high 438.95
52-Week low 223.50
P/E 58.01
Mkt Cap.(Rs cr) 633
Buy Price 352.10
Buy Qty 79.00
Sell Price 357.00
Sell Qty 30.00

Enkei Wheels India Ltd. (ENKEIWHEELS) - Chairman Speech

Company chairman speech

We hereby share the comprehensive performance results of the FY 2020 and latestinformation of ENKEI WHEELS (INDIA) LTD. (hereinafter referred to as EWIL) with ourshareholders. We thank you all for your continued patronage.

Change in the Settlement Term

We report that for the purpose of consolidated financial statements of the ENKEIGroup we have closed the Annual Report of 12 months i.e. from January to December.(Adjusted with 9-month settlement period of the previous term of FY 2019)

Summary of Automobiles and

Motorcycles Sales of 2020

According to the statistics of the Society of Indian Automobile Manufacturers (SIAM)the number of automobile units (including passenger cars SUVs commercialvehicles/trucks buses) sold in India during January to December FY 2020 was 2.94M units.Sales of motorcycles (including scooters) decreased significantly by 13.7M units

79.6% as compared to 77.0% of previous year (FY 2019). The factors such as nationallockdown due to the spread of COVID-19 virus as well as threats of new variant ofcoronavirus post the unlock greatly impacted the recovery of sales in automobiles andmotorcycles. This sales volume result is assumed to be equivalent to the results as before10 years which explains the severity of the declination. Further in April 2020 due tothe introduction of new environment rules relating to transition of BS4 to BS6 emissionstandard by the Ministry of Environment we were refrained from getting orders from BS4compliant vehicle companies. Sales of automobiles and motorcycles began to stagnate fromthe latter half of 2019 due to various market threats like reluctance of lending bynon-bank financial institutions tightening of insurance regulations and stringentregulations on safety functions of 2W vehicles. Therefore the highest sales volume forthe past 10 years which has continued to expand every year is the FY 2018-19 period andwhen we compared the peak period with the 2020 result which is 62.8% in 4W and 62.6% in2W. It can be said that this result represents the actual degree of declination in 2020.In the FY 2020 after releasing the lockdown regulations in India (especially regulationson the movement and behaviour of people) were gradually relaxed and the productionactivities of customers gradually restored. In the fourth quarter of 2020 it was almostrecovered to the state before the lockdown. However as a positive sign due to strictlockdown regulations and rapid shut down in public transportation system for a long periodof time there was seen an increase in buying of automobiles and motorcycles by thepublic.

Order / Production status in Fy2020

In 2020 customer orders for EWIL were linked to the above-mentioned sales trends ofautomobiles and motorcycles that significantly. The orders were decreased during

January to March before the lockdown due to the effect of bad sales performance beforeswitching to BS6 that continued from the previous year. We were expecting that the orderswill be recovered after switching to BS6 in June. But there was a sudden turn to thesituation due to the lockdown that occurred in the middle of March. In April there wereno orders no production and all employees had to stay at home due to the governmentalguidelines waiting patiently for this pandemic to pass. The Government started togradually ease the restrictions from May and our production activities gradually resumedfrom the second half of May. The orders continued to increase and the production levelsreached 80% of the actual work in 2W and 75% of actual work in 4W in the fourth quarter of2020. The actual sales of FY2020 was 634K pcs in 2W (57.9% as compared to 2019) 501K pcsin 4W (70.1% as compared to 2019) and a total of 62.7% in both 2W and 4W combined ascompared to 2019. As with the sales of automobiles and motorcycles the number ofshipments in 2020 was significantly reduced as compared to that in 2019.

Profitability in FY

EWIL has been working on thorough cost-cutting to overcome the shortage of orders thatcontinued from the second half of 2019. Furthermore in response to the lockdown entireENKEI Group is promoting the "5SB: 5

Shrink Balance Activity". For each of the five cost indexes a specific goals wereset activities were conducted and the results were evaluated. As a result of theseactivities the composition ratio of added value was up by 0.5% and fixed cost was reducedby

Rs.328.9 M for the full year as compared to 2019 irrespective of a significant decreaseof 63.3% in sales amount in 2020 from 2019. The item with the highest reduction effect islabour cost; but under the 5SB policy activities to reduce all kinds of expenses such asreduction of consumables review of annual maintenance contract costs energy reductionare being conducted and continuing. However there is a huge impact of decline in salesand even the reduction of all kinds of expenses especially fixed costs could not make upfor the drop in sales. Unfortunately the operatingprofitfell into the negative.

The impact of the exchange rate due to the depreciation of the rupee was also anegative factor. Further in the first half of 2020 the prices of aluminium significantlydeclined due to reduced global demand but in the second half of the year the demand wasshowing signs of gradual recovery and prices suddenly began to rise. During this periodcustomers ent. Thuswere unable this has to follow the fluctuations in the sellingprice of materials. The selling price and purchasing price were reversed and loss ofmaterial was also one of the major negative factors. In addition increase in the pricesof energy is also a factor on the negative side. Energy prices which dropped due to thelockdown have risen since the demand has recovered and at the end of fourth quarterprices were higher than the pre-lockdown period.

Status of the Production Capacity Expansion Plan

From the year 2020 slogan of the production capacity expansion project was changedfrom "Vision 2020" to "PFF: Preparation for our Future". This is areview of the plan that takes into consideration remodelling of the existing productionline anticipating the perspective till

2025. However due to the effectof COVID-19 the plan had to be completely revised forstarting the production at the end of 2020. The first phase

(starting the operation of MAC1 and new painting line) was reviewed at the end of 2019.Since building construction and equipment installation could not be promoted as plannedand recovery of the orders were delayed than expected we are thinking about postponingthe start of mass production of MAC1 to 2022. The same applies for the new painting lineand preparation for starting the production in the third quarter of 2021 has been started.However starting the mass production at the end of 2021 cannot be confirmed yet. In anycase we will gear up early so that we can flexibly deal with the future plan till thestart of production. We have high expectations that commencing the operation of the newproduction line will act as a trigger and we will be able to make major changes andevolve.

Strengthening of Medium to

Long-Term Strategic Sales

Capabilities

As for the areas of improvement in FY 2019 strengthening the sales capability was aproblem. However after the lockdown of 2020 restrictions were laid on proactive salesactivities and therefore the number of orders received for latest 2021 and for 2022 ~ 2023have been been a insuffic significantly bigger concern. After the second half of 2020 wehave been developing a proactive approach towards the customers and aiming to trigger oursales activity with the full support of parent company. We are also promoting new customeracquisition and it will be changing till we can expect a stable customer balance in thefuture. However we didn't make it on time for the orders we received in 2020 and for sometime we will have to overcome these challenges of 2021 and focus on improvingproductivity and reducing cost.

outlook for the Automobile and Motorcycle Market and Order Inflow in 2021

The automobile sales forecast for the year 2021 is expected to be 3.14M units for 4Wi.e. 107% as compared to that of year 2020 and 82% as compared to that of year 2019; andfor 14.2 units for 2W i.e. 104% as compared to that of year 2020 and 80% as compared tothat of year 2019. It will be increased from the sales level in 2020 but it will notrecover to the level of 2019. There is improvement in our sales strategy. However ournumber of orders is not sufficient yet. Although it has reached the break even point ithas not reached a number that can assure positive returns. Therefore we focus on securingrecent orders in 2021.

outlook and Challenges for 2021

Comprehensively the forecast for 2021 shows that we will get out of the worst of thesituation of 2020 but it will not recover to the level of FY 2019. Furthermore thoughthe most recent negative factors like escalating energy cost global shortage of supply ofsemiconductors issues related to import / export maritime logistics rising labour costsetc. become evident we cannot find the for the recovery of sales of automobiles andmotorcycles. Therefore based on the cost reduction initiatives being implemented sincelast year we will focus on improving and overcoming our current weaknesses and willcertainly ensure positive returns. We have a strong belief in the EWIL slogan for 2021"Build strong foundation for our growing".

On the other hand the growth and expansion of the Indian automobile and motorcyclemarket has come to a temporary standstill. However we are confident of a robust expansionin the near future. We are also preparing for that and we will steadily move forwardwithout hiccups. In other words it is a "Preparation for our Future".

In Conclusion

EWIL FY 2020 slogan was "Building Foundation for Tomorrow" and"Preparation for our Future" and for overcoming the difficult situation webuilt and established a foundation while expanding the production capacity to prepare forthe future. Unfortunately we could not get positive results despite our consistentefforts.

However even in 2021 we will continue to be a strong and powerful system thateliminates waste and will promote it for future evolution and changes. In order to do sothe human resource development is an important challenge and it should be the basis forall kinds of activities. This year the action guideline for the entire Enkei Group is"Lift our level. Expand our label". Followed by the slogan of FY 2019"Investing in people Building our future" the human resource development isset as an important guideline. We also aim to improve the capabilities of our employeesthrough on-the-job training (OJT) by organising a "Structure" to maintainstable production and product quality and by active negotiation with clients. Finally wewill become a company that aims to create a sound stable and reliable managementstructure and a work environment based on "safety" "health" and"environment"; and a company that aims to survive forever by contributing to thelocal communities through CSR activities. We would like to extend our deepest gratitude toour stakeholders shareholders clients suppliers employees unions workers andeveryone at the Enkei Group. We look forward to your continued support in the future.

Kazuo Suzuki

Managing Director

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