Tenneco Opens Indian Plant for OEMs - Analyst Blog

Tenneco Inc. (TEN) has said that its new plant in Chennai, India will start producing emission control products and systems for original equipment manufacturers (OEMs) operating in the Chennai area. This is the company’s seventh manufacturing plant in India.

The company has invested $5 million in the 2,600 square-meter facility. The plant has initially been producing exhaust systems for the Nissan Motor’s (NSANY) small car Micra from May this year as well as modular assembled struts and shocks for Ford Motor (F).

Since 1995, Tenneco has established five production plants (including the new one) and two Just-in-Time facilities in India, employing 1,500 people. It has invested over $20 million in the country in the last three years.

Apart from Chennai, Tenneco manufactures emission control components in Halol and Pune and ride control components in Bawal, Pune, Hosur, and Puducherry in India. These facilities serve customers including Tata Motors (TTM), Mahindra & Mahindra, Maruti Suzuki, Renault-Nissan, Ford, Volkswagen, TVS Motor Company, Toyota Kirloskar Motor and General Motors (MTLQQ).

Tenneco’s diversified platform mix has helped win significant business. About a third of the company’s new business since 2007 has been produced in Brazil, Russia, India, China and Thailand (BRIC+T); 80% of which is for small cars. The new business includes more than 85% ($56 million) of incremental business; about 60% launching in BRIC+T; about 65% is on A/B segment (smaller-sized) vehicles; and supply of 13 different vehicle platforms to be launched in nine different countries.

In the second quarter of the year, Tenneco showed a profit of $38 million or 62 cents per share (before special items) versus a loss of $10 million or 22 cents per share (before special items) in the same quarter of previous year. The company has far exceeded the Zacks Consensus Estimate of 44 cents during the quarter.

In South America and India, revenues shot up 43% to $129 million, driven by higher aftermarket sales in South America and improved original equipment (OE) volumes in both regions. EBIT for the Europe, South America and India region increased to $30 million from $6 million in the second quarter of 2009.

In the same quarter, Tenneco generated revenues of $121 million in the Asian market, an impressive 37.5% rise from the year-ago level. The increase in revenues was driven by higher OE volumes in China, particularly on GM and Volkswagen models. EBIT in Asia rose to $13 million from $5 million in the prior year, driven by strong volumes and manufacturing efficiencies.

Lake Forest, Illinois-based Tenneco, a Zacks #3 Rank stock, operates 84 manufacturing plants and 15 engineering facilities worldwide, which are strategically positioned to meet local customer demand. Globally, the company serves more than 39 different OEMs. About 75% of its sales are made to OEMs, while the balance is accounted for by the aftermarket.