In talks with original equipment manufacturers for better alignment
As Europe totters from one crisis to another, Bharat Forge sees an opportunity to increase business.
“Driven by severe economic uncertainty and the worrisome fate of the Euro zone, Europe remains a very volatile market with no long-term trends and developments in the horizon,” the company has said in its 2011-12 annual report.
But it does see an opportunity in original equipment manufacturers (OEMs), to whom Bharat Forge supplies machined and forged components, looking to consolidate their vendors.
The annual report notes that a large number of component suppliers in Europe are small entities.
“It is often difficult for them to maintain steady supplies in such volatile markets.”
The OEMs, the annual report says, have realised the risks of relying on such companies for their regular needs and are looking at vendor consolidation and focussing on developing relationships with technologically strong and financially stable suppliers.
“Bharat Forge is discussing with European OEMs for better alignment, and devising a strategy of dealing with the opportunities arising out of this uncertainty to increase its market share or add new customers.”
The company has been focussing on the medium and heavy commercial vehicles segments globally, so far, and now intends to address the light and small commercial vehicles segments too.
Exports may grow
On the global outlook, Bharat Forge has said that the automotive markets in Europe and China are seeing stress conditions due to European debt crisis, while that in the US remains strong. The company expects exports, which increased 42 per cent to Rs 1,734 crore in 2011-12, to grow this year on the back of non-automotive business and new product development and higher sales in the US.
Bharat Forge manufactures forged and machined components for the auto and non-auto sectors and also makes power plant equipment. It reported consolidated revenues of Rs 6,368 crore and a net profit of Rs 413 crore in 2011-12.
Bharat Forge said that it was operating at over 75 per cent utilisation levels for both forging and machining operations for the auto component business. There had also been considerable increase in utilisation levels for non-auto facilities.
The company said it was investing Rs 500 crore in the two years ending this fiscal to increase capacity. Most of this was in machinery and facilities that added value to the existing product range. On the forgings side, the company was installing an additional 10,000-tonne press that would produce around 30,000-35,000 tonnes a year. The machining capacity was also being expanded as part of the investment programme.
According to the annual report, the income of its overseas subsidiaries was up 34 per cent to Rs 2,891 crore during 2011-12 and profit after tax was Rs 35 crore against a loss of Rs 8.7 crore in the previous year.