Bharat Forge Ltd, one of India’s largest automotive component manufacturers with diversified interests, has reported a decline of 28% year-on-year (YoY) in its Q1FY20 consolidated net profit on the back of declining vehicle demand and resulting production cuts implemented by the automakers. The company has reported consolidated net profit of ₹171.92 crore in Q1FY20 as against ₹238.75 crore for the same period a year ago. It’s total consolidated revenue from operations for the first quarter stood at ₹2,327.86 crore, down 4% YoY. Of that, the company has reported revenues from forgings, its core operations, at ₹2,319 crore in Q1FY20.
“Q1FY20 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 & Gas business, had an adverse impact on our performance," said Baba Kalyani, chairman and managing director, Bharat Forge Ltd.
On the standalone front, Bharat Forge’s total revenue from operations stood at ₹1,347 crore, down 9% YoY, and net profit at ₹174 crore, down 26% YoY. Its standalone EBIDTA for the past quarter stood at 26.1% as against 29% during Q1FY19.
The company said it remains focused on ensuring free cash generation via aggressively cutting costs, accelerating new product development using its own in-house R&D capabilities among other measures. It said it has also secured new business worth USD 30 million for ‘automotive applications’ for domestic and export markets during Q1.
“Given the prevailing weak & 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 H2FY20," Kalyani said in a filing on the BSE.
While Bharat Forge’s domestic revenues stood at ₹556 crore, dropping 7.4% YoY, the company’s export revenues for the past quarter was hit even harder on the back of poor performance of its industrial business. Its export revenues for Q1FY20 were ₹753 crore, which recorded 11% YoY fall. That included revenues from commercial vehicles at ₹389 crore (up 11% YoY), industrial business at ₹243 crore (down 34% YoY) and passenger vehicles at ₹120 crore (down 3% YoY). The company said that its industrial business was adversely impacted by de-stocking of inventory by its customers in the oil and gas sector and production constraints in North American oil and gas markets.
Meanwhile, Bharat Forge’s domestic revenues were hit by the headwinds in the medium and heavy commercial vehicle (MHCV) segment. The company said that it’s MHCV revenue stood at ₹216 crore in Q1FY20, a decline of 30.8% YoY.
“A strong production growth in FY19 coupled with revision in axle load norms amidst weak freight demand has led to an oversupply of freight-carrying capacity. Tightening of lending norms on account of the ongoing NBFC crisis and falling freight rates have dampened fleet operator sentiments," the company said in its official statement.