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Dynamatic Technologies Annual Report 2023 Summary

1. Incorporated in 1973, Dynamatic Technologies Limited (‘Dynamatic Technologies’ or the ‘Company’) is a manufacturer of highly engineered, mission critical products for the Aerospace, Metallurgy and Hydraulic industries. With futuristic design, engineering and manufacturing facilities in Europe and India, Dynamatic Technologies serves customers across six continents.

2. Dynamatic Hydraulics has 80% of the Indian OEM tractor market and 38% of the global tractor market. It operates from three cutting-edge manufacturing facilities situated in India (Bangalore), the UK (Swindon), and the USA (Milwaukee).

3. Some of its notable clients include industry giants like M&M (Mahindra & Mahindra), JOHN DEERE, ESCORTS, CNH (Case New Holland), WIRTGEN, ATLAS COPCO, and ITL (International Tractors Limited). Moreover, it serves other esteemed entities including JCB, TAFE, VST, HAL (Hindustan Aeronautics Limited), SDF, CUMMINS, ACE, MTPF, and DLW.

4. Financial Performance for FY 2022-23:

- Consolidated Net Revenue: ₹13,158 million

- Consolidated EBITDA: ₹1,813 million

- Profit After Tax (Continuing Operations): ₹428 million

- In FY2023, the company's market share in the organized Indian tractor industry rose from 75% to 80%.

5. In FY2023, the Aerospace & Defence segment revenue reached Rs. 43,737 lakhs, marking a significant increase from Rs. 36,014 lakhs in FY2022. The segment achieved a 21.4% year-on-year growth, EBITDA for the year was Rs. 11,682 lakhs, up from Rs. 9,899 lakhs in FY2022. Commercial deliveries and expanded production for key aircraft components are expected to contribute to future growth.

6. Hydraulics segment experienced strong growth driven by increased tractor production in India. Despite a slightly subdued outlook for FY2024 due to below-normal monsoon forecasts and the cyclic impact of El Nino, the segment is expected to maintain a low single-digit growth trajectory. Revenues rose marginally to Rs. 46,166 lakhs, with an EBITDA of Rs. 8,748 lakhs in FY2023 compared to Rs. 7,318 lakhs in the previous year.

7. Despite challenges such as an adverse demand scenario and supply chain disruptions, the metallurgy industry exhibited resilience, contributing to a moderate decrease in the segment's top line. The segment's profitability slightly declined due to inflationary pressures on energy and material costs. Segment revenue for the year was Rs. 41,661 lakhs, compared to Rs. 46,501 lakhs in the corresponding period last year, with a segment EBITDA of Rs. 1,714 lakhs, down from Rs. 2,032 lakhs in FY2022.

8. Facility Relocation: - The company successfully relocated its multi-decade-old facilities from Peenya to the new Dynamatic Aerotropolis campus near Bangalore International Airport from October 2022 to March 2023.

- The move involved disassembling, transporting, and reassembling sensitive equipment and machinery, with minimal disruption to customer services.

- Due to site-specific aerospace qualifications, deliveries experienced partial disruptions in the Q1 of FY 2023-24.

- However, these issues are expected to stabilize in the following quarters. The introduction of new facilities is geared towards supporting the significant growth opportunities that lie ahead for your company in the coming years.

9. Transition to Aerospace Manufacturing: - The company has transitioned from automotive to aerospace manufacturing over the past decade.

- Dynamatic received Boeing's Global Supplier of the Year Award for its outstanding support to Boeing Defence Systems.

Expanding Relationships: - The company has strong relationships with Bell Flight and Airbus, with a top-level "A" rating in Airbus' Industrial Process Control Assessment (IPCA) Audit.

- Dynamatic is working on campaigns for both military and commercial jetliners.

- Dynamatic Manufacturing Limited (DML), a subsidiary of Dynamatic Technologies Limited, has just signed a long- term contract with Spirit AeroSystems to manufacture detail parts for Spirit’s Belfast facility in Northern Ireland.

- DML, which is a Centre of Excellencefor detail parts, will be involved in engineering, manufacturing, and delivering components for commercial and business jet programs at Spirit, Belfast.

10. Milestones: - The company recently delivered its 125th ship set of Boeing's P8 Poseidon Mission Cabinets, highlighting its expertise in this critical component.

- Dynamatic Manufacturing Limited signed a long-term contract with Spirit AeroSystems to manufacture detail parts for Spirit's Belfast facility in Northern Ireland.

- During the year under review, the Company incurred capital expenditure of Rs. 9,084 lakhs for physical infrastructure and Rs. 127 lakhs for procurement of intangible assets. Significant investments have been made in building infrastructure, data security, information systems, and design and development activities, for the future benefits of the Company.

11. Business Diversification: - There is a global shortage of castings and forgings for the Aerospace industry. The company addressed operational challenges caused by the war in Ukraine through corporate restructuring and successfully exited the protective shield process.

- The subsidiary, Eisenwerk Erla in Germany, is transitioning from the automotive foundry industry to aerospace metallurgy.

12. Resilience: - Dynamatic is well-positioned to weather global turbulence with a resilient hydraulics division and a resurgence in aerospace sales.

13. Future Outlook: - The company's leadership team is committed to securing market leadership, technological competence, and brand equity.

- Strategic initiatives are in place to bolster equity and prepare the balance sheet for future growth.

14. Dynamatic Krish-E is an indigenously designed and built multi-rotor UAV for farm application and is aimed at spraying pesticides, water, seeds, weed-removal, crop and soil condition monitoring. The current version weighs 30 kg (with payload of 7 kg) and has an endurance of 20 minutes.This is being offered to farming sector and we intend to productionise it soon.

15. The Company is focused on expanding the size of business with existing customers and expanding its customer base with addition of new customers. With a strong business foundation,technological excellence and industry recognition for products, we are confident of creating utmost value for all of our stakeholders.

16. Dynamatic is investing in the development of high-pressure, heavy-duty cast iron pumps for the construction equipment sector, with plans for production and supply to global OEMs and the aftermarket in the coming years.

17. Anticipated for the year 2024 is a moderate growth outlook for both India and the UK. Nevertheless, higher commodity prices, inflation, a power surcharge, and the removal of power subsidies by the UK Government are likely to challenge the company's margins in the UK.



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