>BHARAT FORGE (IDFC SSKI)

HIGHLIGHTS OF Q4FY09 RESULTS

Standalone performance
• Bharat Forge Q4FY09 results have been below our estimates primarily on account of significantly lower offtake by domestic OEMs due to the substantial inventory pile-up at their end.

• The company’s Q4FY09 standalone revenues declined 50%yoy to Rs2.9bn (we saw Rs4.4bn). The sharp and sudden drop in automobile sales in Q3FY09 resulted in pile up of inventories at both the OEMs and the dealers end which compounded the impact of the downturn with schedules from OEMs falling substantially during the quarter.

• The sharp fall in margins resulted in 1000bps fall in margins to 14.6%. Absolute EBIDTA for the quarter declined 70%yoy to Rs427m.

• Higher working capital led to an increased interest burden during the quarter of Rs295mn. Bharat Forge (standalone basis) reported a loss of Rs80mn after adjusting for the forex gain of Rs987m during the quarter.

Consolidated performance
• Bharat Forge’s consolidated revenues declined 47%yoy to Rs6.1bn while its margins plunged to its lowest ever at 2.9% (16% in Q4FY08 and 10.1% in Q3FY09).

• Led by a sharp drop in operating income and high interest burden, the company reported a loss on a consolidated basis of Rs503mn after adjusting for forex loss (Rs1bn) and customer claim and manpower redundancy cost of Rs299mn).

Other key highlights:
• Tonnage sales (standalone) for the quarter were down 62%yoy at 18,246T while for FY09 it was down 29%yoy at 133,755T.

• Despite the INR depreciation in FY09, the company was unable to increase its export revenues primarily on account of hedges booked in Q1FY09. No such contracts exist in FY10 and hence BFL might witness higher export revenues in Q4FY09 if INR remains at current levels.

To see full report: BHARAT FORGE