Bharat Forge (500493) Q4 97/98 earnings summary

Executive summary

• FY1997-98 was a difficult year amid broad industrial weakness and a 38% drop in medium and heavy commercial vehicle sales; turnover rose modestly, exports offset domestic softness, and margins remained under pressure.

• Restructuring focused on exports, cost reduction, lower borrowings, and phasing down financial-services exposure while expanding crankshaft machining capacity.

Financial highlights

• Net sales rose 2.2% to Rs.5,970.41 million from Rs.5,840 million; income from operations was Rs.6,051.81 million versus Rs.5,966.00 million.

• PBDIT was Rs.1,206 million versus Rs.1,354 million; profit before extraordinary item and tax was Rs.523.40 million versus Rs.627.22 million.

• Adjusted PAT before the extraordinary item was Rs.464.70 million versus Rs.569.72 million; reported net profit after the extraordinary item and tax was Rs.362.07 million versus Rs.186.62 million.

• A 40% equity dividend was recommended, alongside a 13.5% pro-rata preference dividend.

• Operating cash flow increased to Rs.544.37 million from Rs.482.25 million; inventory and trade receivables fell by Rs.214 million.

Outlook and guidance

• Directors expected to maintain business and profitability in the current year, barring unforeseen circumstances; commercial-vehicle demand remained weak.

• Export ambition set at Rs.2,500 million by 2001; the separate production target was exports equal to 25% of production by 2001.

• Management anticipated a challenging 2–3 year period for the forging industry and planned continued restructuring, cost reduction, and efficiency improvements.

• First two Chakan crankshaft lines began commercial production in April 1998; remaining lines were expected to be completed by FY1998-99 end.