McNally Bharat to acquire German group's engineering, mineral technology businesses

06 May 2009

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McNally Bharat Engineering Company Ltd (MBE), one of India's leading engineering turnkey contracting companies working in various industry sectors, will acquire KHD Humboldt Wedag International GmbH's engineering workshop in Cologne, Germany, and its coal and mineral technology (CMT) business in Germany, India, South Africa, Russia and China, the company said in an announcement to the Bombay Stock Exchange today.

''With this acquisition we shall increase our presence considerably in coal and mineral processing space and have a global presence in this area of business,'' said Deepak Khaitan, chairman, MBE.

The terms and cost of acquisition will be announced later, Khaitan said.

MBE, a joint venture between the Williamson Magor Group and GP Birla Group, has a turnover of Rs1,100 crore.

KHD Humboldt is a world leader in supplying proprietary technologies, equipment and engineering/design services for cement, coal and minerals processing.

KHD, through its subsidiaries, offers engineering services, machinery, plant and processes as well as process automation, installation and RR commissioning to its clients all over the world. The services include staff training as well as pre- and after-sales services.

India accounts for about 35 per cent of KHD's turnover of $700 million a year.

For the year ended 31 December 2008, KHD reported revenues of $638.4 million, with a net loss of $7 million or $0.23 per share (diluted). The loss was largely due to recognition of a non-cash fair value loss on the preferred shares of former subsidiaries of $55.1 million and a loss from contract terminations associated with the international financial crisis of $32 million.

For the previous year ended 31 December 2007, KHD reported revenues of $580.4 million with a net income of $42.1 million or $1.39 per share on a diluted basis.

At the time of announcing the results last month, KHD's CEO Jim Busche said that as a result of the international financial crisis, the company's customers put off their capital expenditure plans which affected KHD's results, adding that the company plans to divest its coal and minerals group in Germany, India, China, South Africa and Australia, and close its manufacturing facility in Germany.

McNally had targeted a turnover of Rs5,000 crore by 2015, but, with this acquisition, it would be achieved sooner, Khaitan said.

For the nine months ended 31 December 2008, MBE had net sales of Rs233.9 crore and net profit of 5.67 crore (unaudited).

In 2008, MBE acquired Sayaji Iron and Engineering Co. McNally Sayaji has an existing facility in Gujarat and had decided on setting up another plant.

MBE's other manufacturing facilities are located at Kumardhubi in Jharkhand, Asansol in West Bengal and Bangalore in Karnataka.

The MBE stock closed at Rs63.55 on the Bombay Stock Exchange, up 2.01 per cent, on Wednesday.

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