Newly-acquired firms on track to achieve break-even: CUMI MD

The three new acquisitions of Carborundum Universal Ltd. (CUMI) are on track to achieve break-even by FY23 and FY24, MD N. Ananthaseshan said.

“All the major overseas subsidiaries have performed well on top-line and also, the newly acquired subsidiaries have contributed an additional sales of ₹181 crore during the quarter,” Mr. Ananthaseshan told analysts during an earnings call.

In February, CUMI acquired two German firms — Rhodius Abrasives at an enterprise value of €55 million and Awuko Abrasives from insolvency administrator for €8 million. It also bought Haryana-based Pluss Advanced Technologies for ₹115 crore.

CUMI took control of Rhodius three months ago and Awuko five months ago, Director Finance and Strategy Sridharan Rangarajan said. Rhodius is supported by Rhodius Holdings in terms of common financial and IT leadership across their various businesses. These resources will be available till December. The progress, so far, has been very good.

“All of them are on track as expected, in terms of our own decision-making process,” Mr. Rangarajan said.

“We need to give some time to make sure that we stabilise their operations well and then, we will start reaping the benefits.”

According to Mr. Rangarajan, Rhodius’s performance was impacted by higher logistics and input material cost. To offset it, Rhodius has implemented a planned price correction.

“We expect the full impact of this would be around €3 million. Besides, we expect additional cost in setting up the leadership team, infrastructure costs as well as the depreciation of intangibles. Considering all these, we expect the full year would be a break-even. Losses in Q2 and Q3 will come down and we expect a profit in Q4,” he said.

Explaining further, he said during the first quarter, Rhodius achieved net sales of €18 million. CUMI expects the full year sales to be €70-75 million.

Regarding Awuko, he said CUMI would gain access to the coated abrasive capacity in Europe with global distribution base and an experienced process and application engineering team.

CUMI is currently working on stabilising Awuko’s business that might take a couple of years. Awuko is expected to break even by FY24. CUMI expects to reach sales of €22-25 million by 2026 with high teens return on investment, said Mr. Rangarajan.

Mr. Rangarajan said that they are re-establishing relationships with suppliers who stopped supplying as the company was earlier in financial problems.

“Setting up the supply chain is the priority and we are doing that. We expect the supply chain will become normal only in H2. CUMI’s name and Murugappa Group backing helps a lot in this process,” he said.

“As far as Pluss is concerned, the sales for the quarter was ₹11 crore. We expect the full year sales to be ₹50 crore. We expect that they will break even at full year level,” he said.