Bharat Forge on Tuesday reported a sharp drop in its net profit on rising finance costs and losses posted by overseas companies during the December quarter.
Bharat Forge’s consolidated net profit fell by 81% to Rs 78.81 crore, while revenues rose by 40% to Rs 3,353.36 crore during the quarter. The standalone net profit was down 14.3% to Rs 289.2 crore, while revenues rose by 21.8% to Rs 1,952.1 crore during the December quarter.
Its long-term debt was at Rs 2,489.4 crore, working capital and bill discounting at Rs 4,205 crore during the quarter compared with Rs 2,315.1 crore debt and working capital and bill discounting of Rs 3,339.4 crore in Q3FY22.
The Bharat Forge stock was down 3% on the BSE after the results announcement to Rs 860 but later recovered partially to close at Rs 873.86, a decline of 1.74%.
BN Kalyani, chairman and managing director, Bharat Forge, said the overseas operations posted an Ebitda loss of Rs 62 crore due to ramp-up related issues of the new aluminium forgings capacities in Germany and the US. He expected these operations to become profitable with improvement in capacity utilisation, cost optimisation, price increases and cost compensation from customers.
Kalyani expected growth momentum across both domestic and export markets during Q4FY23 with the defence subsidiary Kalyani Strategic Systems securing export contracts worth Rs 600 crore, taking the defence orderbook to Rs 1,950 crore. These include export orders for artillery gun system.
Amit Kalyani, deputy managing director, Bharat Forge, said the company’s December quarter profits were impacted due to a rise in finance costs and increase in energy, raw material and manpower costs. Finance costs were impacted by a rising in interest costs by around 400-450 basis points, he said. The interest costs included Rs 35-crore mark to market component and he expected quarterly interest costs to be at Rs 50-55 crore levels.
Inflationary pressure and rising manpower costs in Germany also resulted in a decline in profits. The two new aluminium plants in Germany and US were running at 25% capacity and were going through a product development, training and capacity ramp-up phase once they reached 75% utilisation levels, these businesses would report margins in the range of 16-18%, the deputy MD said.
The company expects to see a sharp turnaround in business in FY24. All the new businesses that Bharat Forge had been incubating the last couple of years would start contributing to both the company’s top line and bottom line and become EPS accretive, Amit Kalyani said.
He was also hopeful of getting orders from India for the defence business segment in FY24. The aerospace segment was expected to take off soon by leveraging the company’s capabilities in aerostructures, landing gears and engine components, Kalyani said. A lot of US aerospace companies were setting up manufacturing facilities in India to build large systems and Bharat Forge had an opportunity to be part of their value chain both in India and eventually part of the global supply chain.
In the domestic business, the company secured new orders worth Rs 265 crore during Q3FY23 across automotive and industrial applications. In the casting space, the JSA subsidiary received new orders worth Rs 153 crore. JSA was also acquiring the SEZ unit of Indo Shell Mould in SIPCOT, Erode.