The three newly acquired subsidiaries of Carborundum Universal (Cumi) are on the right track and will achieve the breakeven level in the next two years, the abrasives and industrial ceramics maker, part of the Murugappa group, has said.

“We feel we need to give some time to make sure that we stabilise their operations well and then start reaping the benefits,” Sridharan Rangarajan, director of finance & strategy at Cumi, told analysts during an earnings call.

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In February 2022, Cumi acquired two German firms – Rhodius Abrasives at an enterprise value of €55 million and Awuko Abrasives from insolvency administrator at €8 million plus the settlement cost for the reduction of labour force. It also acquired Haryana-based Pluss Advanced Technologies for Rs 115 crore.

While Cumi was handed over the control of Rhodius three months ago, it took over Awuko five months ago. Rhodius is supported by Rhodius Holdings in terms of common financial and IT leadership across their various businesses. For Cumi, these resources will be available till December and the progress so far was very good, Rangarajan said.

According to Rangarajan, Rhodius’s performance was impacted by higher costs of logistics and input material, and it has implemented a planned price correction. “We expect the full impact of this to 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 breakeven. Losses in Q2 and Q3 will come down and we expect a profit in Q4,” he said.

Regarding Awuko, he said Cumi will gain access to the coated abrasive capacity in Europe with global distribution base and an experienced process and application engineering team. It is currently working on stabilising Awuko’s business that may take a couple of years. Awuko is expected to break even by FY24 and hopes to reach sales of €22-25 million by 2026.

Cumi is re-establishing relationships with suppliers who stopped supplying as the company was earlier in financial problems. “Setting up the supply chain is priority and we are doing that. We expect the supply chain to become normal only in H2. Cumi’s name and Murugappa group’s backing helps a lot in this process,” he said.

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For Pluss, sales for the quarter were at Rs 11 crore and it expects the full-year sales to be around Rs 50 crore. The company hopes to break even at the full-year level.

“All the major overseas subsidiaries have performed well on topline and also the newly acquired subsidiaries have contributed additional sales of Rs 181 crore during the quarter,” N Ananthaseshan, MD, Cumi, said.