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15th July 2003

Bharat Forge PBT soars by 109% to Rs. 38.2 crores, Exports up by 79% to Rs. 79.7 crores in Q1

Installing 2nd 6000 MT press as a part of the expansion programme

Bharat Forge Limited (BFL), India's largest exporter of Auto components has posted a jump of 109% in its profit before tax (PBT) to Rs.38.2 crore from Rs. 18.29 crore in the corresponding quarter of the previous year, while its exports has gone up by 79% to Rs. 79.7 crore during the Q-1 ended June 2003 from Rs. 44.45 crore in the same period last year.

According to the company's unaudited results for the quarter approved by the Board of Directors on July 15, 2003, total sales grossed Rs. 200.7 crore, indicating an impressive growth of 40% from Rs. 143.36 crore over the corresponding quarter of the previous year 2002 - 2003. The net profit zoomed by 114% at Rs. 26.3 crore as compared to Rs.12.37 crore of the corresponding period last year. The company has been able to maintain a tight control on cost, which is seen from the improvement in EBITDA margin by 104 basis point to 28.41% against 27.39% of last year. Interest costs have come down from Rs. 10.8 crore in Q1 last year to 8.7 crore this year. Interest cost as a percentage of sales has seen an all time low of 4.26%. Manpower cost is down to 6.24% of sales as against 7.87% last year. The company has taken the price rise in raw materials and energy costs within its stride and has shown improvement at the operating level.

Commenting on the results, Mr. Baba N Kalyani, Chairman and Managing Director, Bharat Forge Ltd., said, " In Q1FY04, BFL has maintained its robust growth by demonstrating a 40% growth over Q1FY03. The company's export markets is going according to plan. We are quite optimistic about being able to grow in the global markets quite substantially and are therefore installing a 2nd 6000 MT press line. This will expand capacity in the medium size-forging segment, which essentially covers the forged passenger car crankshaft market. The company's success at derisking its business has been reinforced with BFL maintaining high profitability and overall growth inspite of the sluggish conditions in the traditional US markets."

Mr. Baba N Kalyani, further added, "Our strategy to target prospective customers and deepen relationships with existing customers is in full swing. Daimler has awarded BFL new business that doubles the volume of chassis components to be supplied. This accelerated ramp up is a result of Bharat Forge's high levels of quality, and customer satisfaction. The company is continuing its work to secure new markets for itself in the area of engine components for commercial vehicles and passenger cars segment."

BFL's thrust on passenger cars segments calls for a different business dynamics altogether. Bharat Forge has primarily been a leader in the trucks segment, to achieve a similar positioning in the passenger cars market the company is focusing its capabilities in order to cater to the large volumes in the car segment - quality, logistics and supply chain management with a blend of superior product development capabilities would be the critical factors. The building blocks for targeting the car segment are being put in place and more than a decade of BFL's expertise in catering to international marquee customers has come handy. The internal focus of the company is being sharpened to move and grab a sizeable chunk in this segment.

Domestic market of BFL has grown by 22.3 % over Q1FY03 to Rs 121 crore. The domestic economy has shown buoyancy with the commercial vehicles segment registering close to 15% growth during the April-June quarter.

The company's success at derisking its business has been reinforced with BFL maintaining high profitability and overall growth inspite of the steep downturn in the traditional US markets. Of the total exports of Rs 797 million for the quarter, traditional US customers accounted for 22 %, Dana & Oil & Gas for 28 %, Europe at 13 % and China contributed 37 %. Fruits of de-risking are clearly visible. Heavy dependence on US markets from 71 % in Q1 FY03 is significantly reduced with increased contribution from China and Europe during the first quarter being the revenue drivers

BFL's focus to curtail costs has seen higher profitability. The interest cost-to-Sales ratio has gone down to 4.26 % in Q1FY04. Manpower cost-to-Sales has been brought down to 6.24% as compared to 7.87 % during the same period. In all, the focus on topline and bottomline growth taken up by the management in the past few quarters are evident.

The business outlook for Bharat Forge Limited remains strong in both exports as well as domestic segments. Export business will be bolstered by the steady ramp up of new business coupled with increased volume from existing customers. Domestic business is expected to be buoyant due to the increase in sales of commercial vehicles and utility vehicles in the country. Our initiatives with large customers in both domestic and export markets will fructify in the near term adding to a robust performance.