Turnaround Performance

Updated: May 23 2003, 05:30am hrs
Bhansali Engineering Polymers (BEP) has turned around in the quarter to March 2003. Yet it has raised a few eyebrows. BEPs scrip rose sharply and volumes went up prior to the announcement of results on May 17, 2003. The average trading volume during the week before was fewer than 400 shares a day. The average trading volume crossed 25,000 shares per day during the next four days till the announcement of results. The price went up swiftly during this period from around Rs 9.40 to Rs 16.30 on the BSE. After the results were announced, volume and price moved in only one direction to indicate buying spree. The trading volume touched 2,40,000 shares and price moved up to Rs 19.65 on May 20.

Net sales during the quarter to March 2003 remained unchanged at Rs 23.6 crore (Rs 23.7 crore). Other income grew from Rs 2.9 lakh to Rs 40.8 lakh. The company squeezed the cost of raw materials by 20 per cent at Rs 16.2 crore. It also kept a tab on other cost components like power and fuel and other expenses to help better the financial performance.

Low interest outgo, down 80 per cent at Rs 9.5 lakh helped too. BEP repaid the secured loans as well as freed its fixed and current assets of all charges. The company, thus, has made a net profit of Rs 1.7 crore.

BEP is one of the leading manufacturers of ABS engineering plastics used in automobiles, consumer durables, telecommunication equipment, industrial fittings, pipes and other applications. BEP had suffered a major setback after the emergence of soft luggage using nylon clothes. ABS product prices also declined in the global as well as domestic market in recent years.

Munjal Showa
Munjal Showas (MSL) show hinges on the Hero Groups performance as the latter accounts for nearly 85 per cent of MSLs sales. MSLs performance has tapered-off as Hero Honda Motorss sales declined 3.2 per cent in value and 0.7 per cent in volume during the quarter to March 2003. MSLs sales fell 5.6 per cent at Rs 85.1 crore. A substantial increase in the share of raw material cost (adjusted for stock variations) in sales from 69.5 per cent of to 80.6 per cent shows a tremendous pressure on price realisation. Even a 29.7 per cent reduction in other expenses to Rs 6.4 crore, failed to stop a 53.5 per cent dip in operating profit to Rs 7.2 crore. OPM almost halved to 8.5 per cent (17.2 per cent). PBT slipped by nearly 59 per cent to Rs 6.2 crore.

During FY 2002-03 a provision of Rs 1.3 crore towards product warranty costs did affect profit as against the practice of recording the warranty expenses as and when incurred. This has been calculated after taking into account the past trends in warranty claims. However, the fourth quarter results do not show the impact of the change in accounting practice seperately. MSLs business prospects primarily depend on the domestic two wheeler segment that currently accounts for 96 per cent of its revenues, the rest comes from offtake from four wheelers. The company supplies front forks, front and rear shock absorbers and struts for the two wheeler segment and gas springs for four wheelers.

Apart from Hero Honda, other important customers include Honda SIEL, Honda Motorcycles, Scooters India, MUL, Kinetic Motors and Majestic Auto.

Dhruv Rathi & Manish Joshi