With exports accounting for over 58 per cent of the revenues of standalone Bharat Forge in 2015, a thumbs down to oil and gas, construction and mining segments in the North American and European markets, coupled with a clear downturn in the demand for trucks in the North American market, have weighed down heavily on the company.
In a sharp contrast to a projection in the FY 15 annual report on the 2016 American truck production volumes (the largest in the world), the number is expected to decline by over 10 per cent to 7.67 lakh units in 2016, and further to 7.29 lakh units in 2017.
The number in 2015 stood at 8.55 lakh units. The North American truck market had accounted for 20 per cent of the company’s revenue in FY15. On the basis of all major markets globally (NA, Europe and Brazil), the 2016 picture on heavy trucks is not too encouraging, with a projected decline of 6 per cent and 2.4 per cent respectively on heavy trucks and trucks over 6T.
In a presentation to analysts, the Pune-based forgings company said the outlook for 2016 showed increased volatility and uncertainty over the past three months in the macro environment.
There was a sharp volume drop in commodity and allied business (O&G, Construction & mining, and temporary increase in inventory of class 8 trucks from 2 months to 3.5 months).
Production at OEMs had to be adjusted, as a consequence of lower demand and high inventory in the distribution channel.
While the company expects to maintain revenues of FY 2015 in the next financial year, it said it was working very hard to achieve the goal of doubling its 2013-14 standalone revenues to ₹7,000 crore by FY 2017-18. Part of the plan would be to increase passenger vehicle revenues from 5 per cent to 15 per cent of the revenues.
On the bourses, the company’s stock received a drubbing, trading at a new 52-week low value of ₹772.85 apiece. At the end of day, it had shed ₹34.35 over yesterday’s price and closed at ₹793.05 a share with a loss of 4.15 per cent.