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Company : Business Wire 
Tuesday, June 11, 2002 6:00PM IST (12:30PM GMT)
 
MICO Announces a Satisfactory Performance Amidst Recession
Bangalore, Karnataka, India

MICO has recorded a sale of Rs.1606.3 crores in the year ended December 2001. This is 2.8% less than the previous year. The decline in automotive segment was 3.5%. However, sales in 'Others' segment, mainly Bosch Power Tools and Blaupunkt car audio systems, registered growth of 13%. Exports, which constitute 12.0% of sales, were lower by 3.5% from the previous year.

The decline in sales adversely affected the profitability of the Company. Profit before tax at Rs.129 crores was 8% of sales, as against 8.7% of sales in the previous year. Reduction in operating expenses, interest and depreciation were offset by increase in personnel costs.

Profit after tax for the year at Rs.70.8 crores was 4.4% of sales as against 4.9% in the previous year. However, Deferred Tax credit of Rs.10.9 crores for the year raises the total Profit after tax to Rs.81.7 crores.(New Accounting Standard on "Accounting for Tax on Income" introduced by the Institute of Chartered Accountants of India makes it mandatory to show in the Profit & Loss account the differences from the profit as per Income Tax law due to timing differences as deferred tax credit/asset or debit/liability). The Company also added Rs.117 crores to the opening balance of General Reserve of 2001 on account of Deferred Tax credit relating to earlier years.

MICO's shareholders approved a dividend of Rs.31 per share for the year 2001 in its 50th Annual General Meeting on 11th June 2002 at Bangalore. The dividend payout works out to 14.8% of the underlying profits of the year, as compared to 11.0% in the previous year, excluding tax on dividend for both the years.

Negative growth in the tractors and commercial vehicles segments in OE and sluggish conditions in the automotive aftermarket contributed to the decline in the sales and profits of the Company. Slowdown in the global economy, aggravated by the September 11 incidents, adversely impacted the exports. Faced with difficult business situation, unclear growth prospects of the industry and the uncertainty in the implementation of emission norms by the government, the company cut back its capital expenditure during the year. Addition to Fixed Assets of Rs.113.3 crores was 15% below the previous year figure. Investment was mainly in quality improvement and capacity enhancement projects.

Sound and prudent financial management helped the Company improve its net cash flow, after deducting for fixed assets, from the previous year's level of Rs.0.7 crore to Rs.201.6 crores. Inventories were reduced from the previous year's level of Rs.247.8 crores, to Rs.166.0 crores. Borrowings were kept to the minimum, resulting in a net interest income of Rs.5.09 crores, as against Rs.4.61 crores Interest expense in the previous year.

The Company bought back 200,000 shares at Rs.2,500 per share during January 2002. This is the 3rd buyback in 3 years. With this, the Paid-up Equity Capital has come down Rs.32.1 crores and consequently the share of Robert Bosch GmbH, the parent company, has increased to 60.55%.

The decision of Government of India to postpone the full implementation of Euro II Emission norms from 2002 to 2005 has delayed Company's expansion plans. The modern factory set up in Jaipur in 1999 was primarily meant to cater to the requirement diesel fuel injection equipment to meet Euro II standard. Now this factory is likely to remain under-utilised until 2005.

Counterfeit and clandestinely reconditioned goods markets thrive in India in almost all segments of Industry. Auto ancillary sector is no exception to this. The Company's quality goods are pitted against cheap but spurious goods in retail shops. Despite legal actions as well as consumer awareness programmes, Company's market share in the aftermarket is getting eroded. Unless the law enforcement agencies act firmly, cancerous spread of this social evil cannot be contained. The Company on its part has set up a full-fledged cell to combat this problem. It has also introduced holographic packaging to make imitation difficult.

The Company does not expect the business situation to improve significantly in the year 2002. Large stocks of unsold tractors with tractor dealers, low sales of commercial vehicles and declining trend in automotive aftermarket indicate near flat growth in sales in the current year. In an effort to leverage its vast dealer network, the Company is introducing an Integrated Information System in the current year.

MICO has launched Bosch Car Service Workshop in New Delhi recently to cater to the needs of all international brands of passenger cars under one roof. This is an effort to provide world-class service to the new generation cars that have entered the Indian market. This concept has been extremely successful in Europe and is likely to be successful in India as well. The Company is planning to open more such service workshops in other cities shortly.

To sum up, despite heavy odds, the Company has maintained it's profitability at a reasonable level. It is gearing up to strengthen its marketing muscles and leverage its core competencies to remain market leader in most of its product range. With the return of normal business conditions and stable political climate, things should improve.

ABOUT MICO

MICO is a member of Bosch Group, Germany, and it is the largest manufacturer of diesel fuel injection equipment in India. It also manufactures spark plugs, industrial equipment, auto-electricals, hydraulic gear pumps for tractor applications, electric power tools, packaging machines and Blaupunkt Car Multimedia Systems.

 
 
 
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Photograph of Mr. Andreas Nobis, Managing Director of MICO.