Bharat Forge Q1 FY2020 PAT plummets 42% at Rs 174 crore

Pune-based multinational Bharat Forge today reported its financial results for Q1 FY2020. In the first quarter, the company reported revenues of Rs 1,346 crore, down 19.3 percent, compared to Rs 1,668 crore for the same period last year.

In Q1 FY2020, the company reported EBITDA at Rs 352 crore (-27%), EBITDA margin at 26.1 percent compared to 29.1 percent for the same period last year. The PAT was Rs 174 crore (-41.9%) compared to Rs 299 crore reported last year.

The global slowdown in the auto industry affected Bharat Forge's domestic as well as global business. The company reported that the ongoing situation led to the company witnessing its M&HCV (domestic) revenue at Rs 216 crore in Q1 FY2020, a decline of 30.8 percent YoY.

In terms of international business, the company says the North American Class 8 production has been robust for the first six months of CY 2019 and current build rates with strong backlogs will continue the momentum for the remaining part of the year. The company says its freight market has remained stable, trucking capacity has caught up with demand making fleet operators cautious of future investments. It expects that the markets will return to normal ordering cycles as fleets now start evaluating their next year requirements and start placing those orders around October. The company says its trajectory on the passenger vehicle side remains on track as it continues to add new value added products and increase share with existing customers.

Commenting on the result, Baba N Kalyani (pictured above), chairman and MD, Bharat Forge said: “Q1 FY2020 was a challenging quarter with negative demand development in the domestic market across segments, with OEM’s focussed on correcting inventory levels across the value chain. This, coupled with the inventory destocking in the export oil and gas business, had an adverse impact on our performance. Total sales for the quarter at Rs 13,466 million (Rs 1,347 crore) declined by 9.0% compared to Q1 FY2019. PAT was down 25.8% at Rs 1,741 million (Rs 174 crore) compared to Q1 FY2019. During the quarter, the company secured new business worth $30 million (Rs 214 crore) for automotive application across domestic and export markets."

"We look forward to the commencement of operations at CLWT Nellore in the coming quarter. Given the prevailing weak and uncertain demand environment, and especially the situation across the automotive value chain, the government has taken the issue seriously and is putting in place measures to improve demand and sentiments. We expect these measures to result in better off-take from H2 FY2020. While the sales development through the course of FY2020 is dependent on end-markets, our focus will be on aggressively cutting cost, accelerating new product development through our own R&D, free cash generation and strengthening the balance sheet. We have previously seen such cycles and are confident of coming out stronger and faster than before,” added Kalyani.

The company says the government is cognisant of the prevailing economic environment and is expected to implement certain set of measures such as boosting infrastructure investments, sectoral incentives, GST relief to specific sectors like auto and other confidence building steps for the private sector to stimulate economic growth. These measures will benefit the auto industry and help revive demand in H2 FY2020.