Bharat Forge Analyst Update – FY14 Results
FY14 registered the 2nd consecutive year of volume decline for the automotive sector in India at 7.4% decrease compared to FY13. Economic slowdown and higher interest rates continuing to tighten its leash on demand. Bharat Forge ltd’s (BFL) main market (M&HCV segment) witnessed steep decline of 21% in FY 14 compared to FY13. The decline stands at almost 45% when compared with FY12. Volume performance was affected by industrial activity slowdown resulting in underutilization of fleets.
BFL sales to the M&HCV segment reported 11.6% decline in FY14 on a YOY basis at a rate that wasn’t as downbeat as the market. BFL has acquired new business from Passenger Vehicle OEM’s and strengthened market share with new commercial vehicle segment entrants. The automotive industry isn’t the lone suffering wolf with slowdown having clamped industrial activity and dented capital investment.
Resultantly, demand for forged components for industrial sector across segments has compacted. Moderate growth was reported in the energy sector across sources and orders from Government agencies. Through FY ’14, revenues from the industrial segment increased by 10% to Rs 560 crores.
North America & Europe export markets had a strong end to CY13 as Heavy Truck market in both regions reported volume growth. Production of Class 8 truck in North America declined by 11.1% to around 243,000 units. Net orders in CY13 rose 17% from CY 2012 to 267,000 units. Growth in NA Heavy truck segment is expected to be ongoing on the back of strong US economy and aging fleet. The Heavy Truck market is expected to grow by 10 -15% in CY14.
European Heavy Truck segment reported volume increase of 8.3% in CY13 driven by strong growth in Q4 CY13 on account of pre-buy in advance of new emission norms that came into effect in January 2014. Growth is anticipated in H2 of CY14 despite a slow start to result in a flat year for the Heavy truck segment.
The Wholly Owned operations have registered EBITDA% of 7.8% as against 8.5% in the previous quarter. Decline is attributed to European CV space, which declined marginally post the pre-buy in advance of Euro VI emission norms which were implemented from January 1, 2014.
Bharat Forge Aluminumtechnik GmbH & Co KG (BFAT) won a prestigious multi-year contract worth EURO 250 million from a German OEM. The order enhances the company’s presence in the fast growing aluminum components business that has been finding increasing application in passenger vehicles.
“BFL’s performance in FY14 has been encouraging with robust operating leverage and cash flows despite sub optimal utilization levels in India caused by significant weakness in the Commercial Vehicle segment. The uncertain demand environment which prevailed during FY14 is beginning to change positively especially in the external markets and we expect both North America & Europe to grow in FY15. The domestic market might witness demand recovery in 2H FY15,” said N. Kalyani, Chairman & Managing Director.
He added, “The highlight of the year is the series of order wins across segments & geographies from new and existing customers and our investments in R&D delivering path breaking solutions to our marquee customers placing us at the forefront to capture demand revival. We are witnessing strong momentum going into FY15 with topline growth expected to outpace the underlying market growth in all geographies driven by market share gains and new programs coming on stream. Looking ahead into Q1 FY15, we anticipate demand to be slightly higher compared to Q1 FY14 & Q4 FY14”
STANDALONE FINANCIAL HIGHLIGHTS FY14
|Particulars||Q4FY14 Q3FY14 Q4FY13||FY14 FY13|
ExportRevenue OtherOperatingIncome Total Revenue
EBIDTA EBIDTA% OtherIncome PBT
PBT% ExchangeGain/ (loss) PBTafterExGain/ (loss) Exceptional Items
|48,015 42,702 37,119
3,958 3,289 3,490
5,079 4,797 3,112
268 235 144
9,305 8,321 6,746
2,304 2,145 1,525
24.8% 25.8% 22.6%
353 284 205
1,710 1,413 851
18.4% 17.0% 12.6%
(27) (30) (107)
1,683 1,383 744
123 - -
1,806 1,383 744
1,190 927 501