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Informist, Wednesday, Feb. 12, 2025

By Anand JC 

MUMBAI – The top line and bottom line of Bharat Forge Ltd. fell year-on-year and missed the consensus estimates for the December quarter, with the company pinning the blame on 'anaemic' conditions in the European Union and the lumpy nature of defence business.

Bharat Forge reported a net profit of INR 3.46 billion for the December quarter, down over 8% on year and below the analysts' estimate of INR 3.76 billion. Sequentially, the bottom line contracted a little over 4%.

The company's revenue from operations was INR 20.96 billion for the December quarter, down over 7% from a year ago and nearly 7% sequentially. Analysts had projected the top line at INR 22.84 billion. 

Bharat Forge's consolidated earnings before interest, taxes, depreciation, and amortisation for the reporting quarter was INR 6.38 billion, down 5% on year but marginally above analysts' projections. Its standalone EBITDA for the December quarter was INR 5.89 billion, down 9% each on year and sequentially. Its EBITDA margin was 28.1%, down 40 basis points from a year ago. 
 

"The primary factor for the decline in performance is the anaemic economic condition in the EU, which impacted the performance of the European operations and exports into Europe. The lumpy nature of the defence business also impacted the performance of the company in the quarter," Chairman and Managing Director Baba Kalyani said in a presentation to the investors. 

"Looking ahead into Q4 FY25 (Jan-Mar) and FY26, we expect the consolidated performance to be stable, as pockets of strength emerge from the newer businesses to offset the slowdown in the automotive sector globally," Kalyani said. The company will undertake a thorough review of the manufacturing footprint of its overseas business to achieve operational stability amid a challenging environment, he said.

Bharat Forge earned a consolidated revenue of INR 30.61 billion from its forgings business, nearly 9% lower on year and largely flat sequentially. Revenue from its defence business for the December quarter was at INR 3.37 billion, down 22% from a year ago and nearly 34% sequentially. 

INDIA REVENUE

Bharat Forge's domestic revenue for the quarter was INR 9.19 billion, down 10% on year and 12% sequentially. The company's India revenue was at INR 31.04 billion in Apr-Dec, up 8% on year. 

Net sales from the commercial vehicle business in India for the December quarter was INR 2.28 billion for the reporting quarter, nearly 12% lower on year. The company said in the first nine months of the current financial year, a large base effect coupled with a cool-off in the growth of capital expenditure resulted in tepid demand for the sector and for its commercial vehicle business.

Revenues from its passenger vehicle business in India shot up to INR 985 million in the latest quarter, up 28% on year and 7% sequentially. The company attributed this growth to increased penetration.

For the quarter, its revenues from domestic sales in the industrial business contracted 13% on year and nearly 20% sequentially due to lower defence sales during the period. "Despite capex momentum slowing down and its potential impact on our industrials business in the near term, we believe that sectors such as nuclear space provide ample opportunity in the medium to long term to grow our industrial revenues," the company said.  

EXPORT GEOGRAPHIES

The company's export revenue in the December quarter was INR 11.51 billion, down 2% from a quarter ago and 5% from a year ago. The export revenue in Apr-Dec fell 5% on year to INR 34.96 billion.

Overseas, net sales from the commercial vehicles business declined 5% on year to INR 4.99 billion, while revenue from the passenger vehicle business fell 26% on year to INR 2.42 billion. While the North American market remained stable, weakness in European markets and select Asian markets dragged the automotive business revenue lower, the company said. Going forward, it expects market conditions in North America to improve, while sentiment could be impacted by a gloomy economic outlook in Europe.

In the December quarter, the company earned INR 8.54 billion through exports to the Americas, up nearly 6% from a year ago and flat sequentially. Sales in Europe fell 17% on year to INR 2.33 billion. Bharat Forge's revenues from sales to other Asian markets in the reporting quarter fell 50% on year to INR 637 million.

Net sales from the industrial business abroad increased 13% on year to INR 4.08 billion in the December quarter.

The company expects the aerospace sector to 'finally' see some strong traction in the coming years.

"Some OEM (original equipment manufacturer) specific weakness, as well as a frail economic recovery in Europe, affected PV (passenger vehicle) exports. New order wins have come in from the PV segment, which will support growth over the medium term," the company said.

EXPENDITURE PROFILE

Bharat Forge's total expenses for the reporting quarter was INR 16.54 billion, down nearly 8% each on year and sequentially. The reduction was largely driven by a contraction in its raw material expenses, which account for nearly half of the overall expenses.

The cost of materials consumed by Bharat Forge fell to INR 8.30 billion, down over 13% on year and nearly 11% sequentially. Staff costs increased nearly 5% on year to INR 1.58 billion, while depreciation costs fell 2% on year to INR 1.10 billion. Its other expenses declined 2.5% on year and over 10% sequentially to INR 4.88 billion.

Bharat Forge's net profit margin decreased to 16.51% in the December quarter from 16.69% a year ago, alongside a fall in operating margin to 29.10% from 29.30% a year ago. 

Wednesday, shares of Bharat Forge ended at INR 1,104.65 on the National Stock Exchange, down 0.7% from the previous close. Bharat Forge disclosed its December quarter results after market hours on Wednesday.  End

Edited by Saji George Titus

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