Bharat Heavy Electricals (500103) Q4 98/99 earnings summary

Executive summary

• FY1998-99 turnover reached a record Rs.67,946 million, up 5% YoY, while PBT fell 8.75% to Rs.9,323 million and PAT fell 24.31% to Rs.5,446 million.

• Order inflow was Rs.58,351 million, leaving an order book above Rs.100,000 million for execution in FY1999-2000 and beyond; performance qualified for the Government MOU's “Excellent” category for the tenth consecutive year.

• The year combined weak industrial demand and declining selling prices with major power-sector wins, export advances and capacity additions; net worth rose 18.8% to Rs.30,825 million.

Financial highlights

• Turnover rose to Rs.67,946 million from Rs.64,713 million; value added increased 3.34% to Rs.29,832 million.

• Operating profit was Rs.11,073 million versus Rs.12,055 million; PBT was Rs.9,323 million versus Rs.10,217 million and PAT was Rs.5,446 million versus Rs.7,195 million.

• EPS declined to Rs.22.3 from Rs.29.4; the recommended dividend remained 25% of paid-up capital, or Rs.2.5 per share.

• Prior-year comparisons included Rs.820 million of exceptional tax-refund interest and Rs.940 million from withdrawal of excess tax provisions; these items did not recur in FY1998-99.

Outlook and guidance

• Long-term power-sector prospects were supported by planned capacity additions of 80,000 MW in the IX and X Plans, alongside investments in power evacuation and distribution.

• Management expected recovery in BHEL's basic-goods markets to lag other segments; it cited early signs of improving industrial growth in Q1 FY1999-2000.

• Competitive priorities included cost reduction, quality improvement, shorter delivery cycles, customer responsiveness and new boiler and pollution-control collaborations.

• Y2K remediation was expected to be completed by September 1999 for a few remaining critical systems; contingency plans were in place and costs were not considered material.