Records an impressive quarter with strong sales and surge in profits

Bharat Forge Limited (BFL) today announced two new contracts that it has won in the area of passenger car components. BFL has been chosen by Ford Motor Company and Daimler Chrysler as a supplier of components for their global passenger car programs. Ford Motor Company, USA has initiated development of crankshaft forgings with BFL. As a part of this multi-year sourcing initiative, the program has been launched and shipments are expected to commence from mid 2004 timeframe. Similarly, Daimler-Chrysler has chosen BFL to supply crankshaft and camshaft forgings for their passenger car engines in Germany. BFL has also won an order to supply control arm forgings to a global passenger car company in Australia. BFL has also bagged a new multi-year order to supply steering knuckle forgings to Dana, USA.

BFL had identified the global passenger car market as a high growth potential segment going forward. The company had been working with potential customers in developing a market for itself in this segment. These orders are the result of BFL’s focused approach in expanding its global business strategically. This breakthrough marks BFL’s entry into a large and rapidly expanding global market with huge growth potential. These new orders have given BFL a strong foothold into the market with marquee customers. BFL will look to leverage these orders for further ramping up business in this segment.

“The contracts for passenger car components is a major breakthrough for BFL. A large new market segment has opened up for BFL to grow its business. It is a matter of great pride for us that Bharat Forge products will now power Ford and Daimler-Chrysler cars globally. We have accelerated the installation of the 6000 ton Press and it is now ready for production,” said Mr. Baba Kalyani, Chairman & Managing Director, Bharat Forge Limited.

BFL announced its results for the second quarter ended 30th September 2003 today. The company has recorded strong sales growth accompanied by surge in profits. BFL recorded total income of Rs. 224.4 crore and a Profit after Tax of Rs. 29.4 crore for the 2nd quarter of FY 2004. This represents a growth of 43.30 % in total income and 69.16 % in PAT. PBT rose by 65.98% to Rs. 42.6 crores.

For the 6 months ended September 30, 2003, BFL has recorded total income of Rs. 428.5 crores and PAT of Rs. 55.7 crore. This is a quantum growth of 42.77 % over the total income and 87.28 % in PAT. The cost reduction exercise undertaken by the Company has led to a huge jump in PBT, which increased by 83.69% to Rs. 80.8 crores.

The domestic market has exhibited phenomenal growth in the first half of this financial year. In order to meet the demand of the buoyant domestic market, the Company has stepped up its production to take care of its domestic customers requirements. BFL’s domestic sales grew by 41.4 % to Rs. 259.9 crores. This is significantly higher than the industry growth of approximately 30%. Exports grew by 38.74 % during the same period. For second quarter domestic sales increased by 63.67% to Rs. 138.9 crores.

Looking forward, the company expects a revival in the US market in the next calendar year. In Q2, BFL has begun exports to Second Auto Works, China and further ramping up for Renault should see exports maintain their momentum in the second half of the financial year.

BFL has hedged rupee appreciation on exports by swapping its debt portfolio into dollar denomination. Steel prices have risen globally. The effect of the rise in steel prices on costs have been largely taken care of by price increases from customers and through internal cost reduction.

Mr. Kalyani further added, “Another high potential area we are targeting is the global engine components segment for heavy duty diesel engines. We are anticipating strong demand for machined crankshafts for these engines. We are setting up a state-of-the-art-plant for crankshaft machining. This facility will be a generation ahead of the existing facilities in the world. We are planning to have this new capacity ready for production in phases, starting by the fourth quarter of FY 2005. BFL’s strategy is to complement its global customer’s requirements. Customer needs are changing and they expect suppliers to partner with them and emerge as a FULL SERVICE SUPPLIER with the testing and validation facilities. To achieve this, BFL is setting up a full-fledged, world class product validation and testing facility which will enable it to offer an end to end solution to its customers.”

BFL sees an immense potential in the heavy-duty machined engine components segment, where it currently has a 5 % market share globally. The target is to scale up to garner a major share to be a market leader. To address these opportunities and to become a Full Service Supplier, BFL will offer to its global customers design, engineering, manufacturing, testing and validation facilities.