Bharat Forge (500493) Q4 00/01 earnings summary

Executive summary

• FY00/01 results weakened amid sharp domestic and export demand declines; sales fell 7.8% and PAT fell 47.9% YoY, while operating margin held at 25.4%.

• Cost reductions and a demerger of investment and wind-mill divisions strengthened the focus on manufacturing; FY01/02 revenue outlook remained subdued.

Financial highlights

• Sales declined to Rs.5,232.6m from Rs.5,677.2m; total income fell 6.9% to Rs.5,447.9m from Rs.5,852.7m YoY.

• PBDIT was Rs.1,328.0m; PBT fell 50.7% to Rs.358.7m and PAT fell 47.9% to Rs.326.5m YoY.

• Interest expense rose 29.6% to Rs.573.0m and depreciation rose 32.9% to Rs.396.9m, primarily following commissioning of the Rs.1,450m press line.

• Operating margin was 25.4% versus 25.9% in FY99/00; cost savings in energy, scrap, stores, purchasing and subcontracting totaled Rs.78.7m.

• Board recommended 30% equity dividend (Rs.3 per Rs.10 share) and 11.5% preference dividend.

Outlook and guidance

• FY01/02 revenue prospects were subdued: domestic auto-sector growth was projected in single digits, with no major recovery expected in the year.

• Cost programme targeted annualised savings of Rs.300m by end-FY01/02, including Rs.100m from manpower rationalisation and over 15% lower interest burden YoY.

• No significant capex was anticipated over the next few years; debt reduction was expected to bring debt-equity back toward FY99/00 levels by FY02/03.

• Medium-term growth priorities included exports, machined high-value components, small forgings and oil-and-gas products; export contracts were in the pipeline.