Financial Daily from THE HINDU group of publications
Wednesday, May 12, 2004
Financial Daily from THE HINDU group of publications Wednesday, May 12, 2004 |
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Corporate
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Performance Columns - Microscope Bharat Forge benefits from robust auto sales Sowmya Sundar
BHARAT Forge's earnings performance was in line with expectations. In the year 2003-04, sales growth in the domestic markets was much higher than that in the overseas markets. Revenue from the domestic market rose 37 per cent while exports rose only by 22 per cent. Obviously, Bharat Forge benefited from the robust growth in automobile sales during the year. Its sole supplier status for quite a few automobile companies in India helped it scale up its domestic revenues. The comparatively lower export growth could be due to the company running its manufacturing facilities to near full capacities. After a ramp up in the first couple of quarters, exports have been almost stagnant in the last two quarters of 2003-04 on a sequential basis. Given the capacity constraints and the robust domestic demand, the company could have gone slow on exports. Operating margins stable: Despite the appreciation in the rupee and the increase in steel prices, Bharat Forge has maintained its margins. At the operating level, the margins declined only marginally from 34.6 to 34. 4 per cent. The effect of the rupee appreciation could have been lower as BFL has diversified into non-US markets during the year. Interest costs continued to decline as the company used cash flows to repay or swap its debt. Impact of acquisition: The acquisition of Carl Dan Peddighaus (CDP), a UK based forging company, would take effect from the March 2004 quarter. CDP's earnings at Rs 9.69 crore for the March 2004 quarter, translates into a 25 per cent growth for the consolidated entity over BFL's earnings for the quarter. Exports to perk up: After the capacity expansion, BFL's exports would perk up. The acquisition of CDP would not only give BFL access to the passenger car market but also expand its reach in Europe. With least overlaps in terms of manufacturing capacity, BFL would also have a wider product range. The acquisition of CDP would give a further fillip to the earnings growth of BFL.
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