Bata India (500043) Q4 03/04 earnings summary

Executive summary

• Turnover increased to Rs 7,245.6m from Rs 7,114.0m in 2003, but the reported loss after tax widened to Rs 627.5m from Rs 260.5m.

• Results reflected restructuring and other major charges; management expected cost, sourcing and retail initiatives to support a turnaround in 2005–06.

Financial highlights

• Sales were Rs 7,245.6m versus Rs 7,114.0m; net sales after excise duty were Rs 6,940.5m versus Rs 6,741.0m.

• Reported loss before tax was Rs 634.7m versus Rs 213.3m; loss after tax was Rs 627.5m versus Rs 260.5m.

• One-time and restructuring charges included merchandise clearance Rs 135m, production rationalisation Rs 148m, doubtful-debt provisioning Rs 70m, Gurgaon relocation Rs 22m and VRS cost Rs 328m.

• No dividend was recommended for 2004 due to the loss.

Outlook and guidance

• Management expected restructuring initiatives to start yielding benefits in 2005 and forecast a significant turnaround in 2005–06.

• 2005 priorities included retail growth through new and refurbished stores, franchise operations, new products and improved customer service.

• Global sourcing, tax-exempt manufacturing locations, tighter credit controls and streamlined logistics were planned to improve costs, collections and margins.

• VAT introduction from April 1, 2005 was estimated to add Rs 150m of cost, to be offset gradually through price increases and procurement improvements.