Bharat Forge (500493) Q4 96/97 earnings summary

Executive summary

• FY97 sales rose 20% to Rs.5,833.456m despite slower economic growth; higher capacity use, improved product mix and working-capital management supported stronger underlying profit.

• Net profit after the Rs.383.108m extraordinary Octroi charge and tax was Rs.186.616m, versus Rs.508.736m in FY96; profit before extraordinary items and tax increased to Rs.627.224m from Rs.509.501m.

• Expansion and diversification continued, with crankshaft capacity in trial runs, a new forging plant under construction and small-forging production launched in April 1997.

Financial highlights

• Sales and operating income reached Rs.5,833.456m, up from Rs.4,875.830m in FY96; reported turnover growth was 20%.

• Profit before extraordinary expenditure and tax was Rs.627.224m, up from Rs.509.501m; the Rs.383.108m Octroi-related charge reduced PBT to Rs.244.116m.

• Net profit after extraordinary expenditure and tax was Rs.186.616m, versus Rs.508.736m; tax provision was Rs.57.500m.

• Gross profit was Rs.1,354.607m versus Rs.1,145.149m; interest and finance charges were Rs.518.834m versus Rs.459.265m.

Outlook and guidance

• Directors expected further improvement in business and profitability in FY98, barring unforeseen factors; the Union Budget was expected to support reasonable automotive-industry growth.

• Fresh export initiatives and a finalized Japanese six-cylinder crankshaft contract were expected to drive substantial export growth; bulk supply was expected to start later in FY98.

• The Chakan machined-crankshaft project was expected to begin commercial production in Q2 1997; the new forging plant was expected to start in Q1 1999.

• Forging capacity was planned to reach 120,000 tonnes per year by 2000-01, with a 16,800-tonne Weingarten press line scheduled for installation in 1998.