SKF India (500472) Q4 04/05 earnings summary

Executive summary

• Net sales and services rose 34% YoY to Rs. 7,813.9 million; profit after tax increased to Rs. 640.7 million from Rs. 566.1 million.

• Growth reflected strong demand, operational efficiency, new products and Direct Customer Delivery; excluding DCD sales, comparable growth was 26%.

• Strategy centered on expanding beyond bearings into integrated, knowledge-based products and services, supported by customer partnerships, Six Sigma and manufacturing expansion.

Financial highlights

• Net sales and services were Rs. 7,813.9 million versus Rs. 5,813.1 million in 2004; other operating and miscellaneous income was Rs. 346.2 million versus Rs. 230.1 million.

• Profit before tax was Rs. 1,030.5 million versus Rs. 883.3 million; profit after tax was Rs. 640.7 million versus Rs. 566.1 million.

• Basic EPS was Rs. 12.21 versus Rs. 12.51; diluted EPS was Rs. 12.21 versus Rs. 11.40.

• Net sales growth was 34% YoY; excluding Direct Customer Delivery sales, comparable growth was 26%, with DCD sales carrying lower margins than locally manufactured products.

• Proposed dividend was 35% for 2005, compared with 25% in 2004.

Outlook and guidance

• 2006 outlook anticipated sustained high demand from automobiles, capital goods and the broader economy, with potential for higher profitability and margins.

• Manufacturing expansions at Pune and Bangalore were targeted for completion and start-up in H1 2006.

• Priorities included aggressive growth, stronger leadership, continued Six Sigma, broader Key Account Management and customer service differentiation.

• Planned competitiveness measures included cost reduction, productivity and asset utilization improvements, value-added products and faster product development.