 "Steffen Berns")
Steffen Berns, managing director, Bosch, explains, in an interview with Mahesh Kulkarni, how the company managed to perform better than the industry. Edited excerpts:
Bosch has ended the fourth quarter of FY13 with flat sales and 19 per cent lower net profit. What are the reasons?
It is mainly because of rupee depreciation and a rise in the cost of materials during the fourth quarter. The rupee fell 15 per cent in the quarter. Year-on-year deterioration was three per cent. Our material cost increased by 2.5 percentage points. The prolonged slowdown in the automotive industry in 2013, coupled with weak consumer demand, has impacted the overall industry as well as our growth. However, our cumulative measures on cost control throughout the year helped us limit the decline in profits despite unused capacity.
You have shown a huge inventory in the quarter. How was the pick-up from customers?
We had no problem with the customers picking their orders. We have increased the production in the fourth quarter.
Your automotive business has come down from 89 to 87 per cent of total business. Is there any shift in the business?
Our automotive business has remained constant in the difficult market. But our strategic target is to increase our non-automotive market share and we have been successful on this front. The non-automotive business grew by 19 per cent
in 2013, which is a big success. Our non-automotive business has been doing well, with its share increasing steadily as we continue to expand our operations in this area. The power tools and packaging technology division registered double-digit growth for the year 2013.
So, it was a strategic decision to grow the non-core segment?
Yes, we would have also liked to grow fast in the automotive business. The strategic target to grow faster in the segment had been defined. We have been successful in doing so.
Of course, the automotive business is market-driven and if the market goes down three per cent, then it is difficult to grow fast. I would not call it a non-core business. We do have four business segments. Worldwide, for Bosch, the automotive segment has a share of 66 per cent and in India, we had a share of 87 per cent in 2013.
If you look at the potential, we can increase the non-automotive business much more and this is what we want to do. But this does not mean we go slow on the automotive business. We do both in parallel. But we have higher growth potential in the non-automotive business.
What would be the mix of auto and non-auto businesses in three to five years?
We do not have specific targets. In the divisions, we do have our targets. But especially, on saying there should be a certain share of non-automotive or automotive does not make much sense because we want to grow in both.
And, then there is always the question of how fast you can grow in one and definitely, we are not going to slow in one and get higher share in the other. But it is just the outcome of each segment trying to grow profitably as much as possible.
Is faster growth in the non-auto segment connected to the slowdown in the auto sector?
Yes, the non-automotive segment is growing faster than the automotive business. We tried to grow in each field and the important level is the growth in the market share. If the market is declining at three per cent and we are constant, this is a good result.
When you grow in another business with 20 per cent, the share goes up. That is simple arithmetic. Of course, you can increase your share much more easily if one partner is stable and other is growing fast. Then, when both are growing fast, the potential to grow faster is much higher in the non-automotive business.
Are you taking any specific measures to increase the share of automotive business?
What we are always doing is to look into market shares by offering competitive products and for example, we have grown very nicely with our starters and generators. Because we do have the right products that were well received by the market both domestically and internationally.
We are developing further products and solutions to also grow in the automotive market. I do not have a fixed target now on the specific shares for automotive and non-automotive segments.
You have started a new business unit, ‘Energy and Building Solutions’. Will this further increase the share of non-automotive revenues?
Yes, it is small as I said. Therefore, even if we have high increase in this business, it is not going to make a major impact on the overall share. But, if you have several businesses each growing in double digit you will in the end see the increase in the share of non-automotive business and this is definitely going to happen in the next years in India.
Have you seen any impact of the excise duty cut so far?
Time is too short to assess that. We expect that there will be some additional volumes off take in the coming months.
What is the outlook for the automobile industry generally and Bosch in particular in 2014?
This is very difficult to answer. We hope and expect that after the general elections, the automotive market is going to pick up. We also see because of excise duty cut we will have some additional pull or push from the market. But how much it is going to be is very difficult to forecast.
For Bosch, we are committed to expanding and strengthening our footprint in India. We will spend Rs 600 crore on capital expenditure in 2014. Last September, we broke ground in Bidadi on a new manufacturing plant for diesel injection components. This year, we will be further augmenting our existing facility at Adugodi, which will be transformed into a modern R&D hub.
