Mico's cost cutting measures to maintain profitability

By Our Special Correspondent

BANGALORE, JUNE 17. With the automotive sector in India having registered a negligible growth of 0.7 per cent, MICO, a major automotive components company, has suffered a setback in its profitability. And the company faces a daunted task considering that it has registered a mere four per cent increase in sales in the first quarter this year and it has begun cost-cutting measures.

Giving details of the company's financial position at the 49th annual general meeting, the Chairman, Mr. Hubert Zimmerer, said that with a view to containing the adverse effects of the slowdown, MICO would intensify its efforts on measures implemented last year.

With the customer demand both in the original equipment (OE) segment and in the after-market remaining sluggish, the company, he said, was able to register only a nine per cent increase in turnover from last year's Rs. 1652.30 crores. Its sales to OE customers decreased volume-wise. However, the change over to Euro II compliant fuel injection systems with higher unit price led to a turnover increase of 15 per cent and the after-market sales increased by three per cent. Exports grew by 12 per cent to Rs. 199.80 crores and the company had refocussed itself to increase its export business.

For the year 2000, it recorded profit after tax of Rs. 81.2 crores or 5 per cent of turnover, which is a 23 per cent dip over the previous profit of Rs. 105.8 crores or 7 per cent of turnover. Mr. Zimmerer said the additional cost reduction projects included ancillarisation in auto electrical and import substitution in distributor pumps; continuous review of and reduction in new investments; improved asset utilisation through process rationalisation; and introduction of ship-to-stock/ship- to-use as a part of improved supply chain management.

On the outlook for the company, he said that in the OE business there would a change in the product mix from inline pumps to distributor pumps to satisfy Euro II emission standards and later to electronic diesel control for Euro III standards.

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Section  : Business
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