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India's Motherson Sumi's profit unexpectedly falls on Dutch unit's one-time cost

NEW DELHI (NewsRise) -- Motherson Sumi Systems Ltd., partly owned by Japan's Sumitomo Wiring Systems Ltd., Thursday reported a surprise 21% drop in quarterly consolidated net profit as a one-time expense outweighed higher revenue.

The auto parts maker's net profit declined to 3.47 billion rupees ($54 million) in the three months ended June 30, from 4.39 billion rupees a year earlier. Profit was hit by a one-time expense of 1.5 billion rupees toward the early redemption of bonds worth 500 million euros ($586 million) by its Netherlands-based unit, the company said in a statement. Analysts had expected a net income of 4.76 billion rupees in the quarter.

Consolidated revenue during the April to June period increased 25% on-year to 131.94 billion rupees. Revenue of the standalone Indian operations rose 19% to 16.68 billion rupees. Motherson, which counts the Volkswagen Group as its biggest customer, earned as much as 86% of its revenue from overseas last quarter.

The consolidated earnings included for the first time the revenue of Finland's PKC Group, which Motherson had acquired earlier this year. PKC reported a revenue of 254 million euros during the quarter.

Motherson, owned 25% by Sumitomo, said the advance payment by the Dutch unit Samvardhana Motherson Automotive Systems Group BV, which supplies vehicle exterior and interior parts, resulted in redemption premium and unamortized transaction cost during the quarter.

Meanwhile, Motherson is continuing to build new factories in several countries to attain its goal of $18 billion in annual revenue by 2020.

The company is building one factory each in the U.S, Hungary and Germany to add to existing facilities in Asia, Europe, U.S. and India.

Motherson is seeking to benefit from efforts by global auto makers to cut costs in an intensely competitive market by sourcing parts from low-cost locations such as India. The factories overseas form part of the company's strategy to be closer to its customers and also insulate its operations from currency fluctuations.

Motherson is raising debt as it builds capacities globally. Its consolidated net debt rose to 65.89 billion rupees last quarter, from 54.65 billion rupees a year earlier.

The company has earmarked a capital expenditure of 20 billion rupees this fiscal year, Chief Financial Officer G. N. Gauba said in an analysts' call. The spending is likely to be lower next year as Motherson's upcoming new plants in Alabama in the U.S. and in Hungary will "get almost fully capitalized".

Shares of Motherson fell 3.80% to 317.5 rupees in Mumbai trading, while the benchmark BSE Sensex declined 0.8%.

--Santanu Choudhury

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