[Gen-AI Analysis] Bharat Forge Ltd. Business Report FY ended 2012 - MarkLines Automotive Information & Gen-AI Platform

Bharat Forge Ltd. Business Report FY ended Mar. 2012

Business Highlights

Business Overview

-Consolidated sales in FY ended Mar. 31, 2012 increased by 23.6% to Rs. 63,684 million (FY ended Mar. 31, 2012: Rs. 51,544 million), while operating profit rose by 27.3% to Rs. 10,854 million (FY ended Mar. 31, 2012: Rs. 8,527).

-In FY ended Mar. 31, 2012, strong export growth of 42% was driven mainly by robust growth in the Commercial Vehicles market globally as well as traction in non-automotive business.

-Sustained focus of productivity and cost control raised the operating profit.

Recent Development Outside India

<China>
-After having turned around in CY2010, the Chinese JV, FAW Bharat Forge, recorded an even better performance with greater capacity utilization in the first half of 2011. But the second half saw a dramatic fall in demand in China. For CY2011, total four-wheeler production growth was only 1% in China. While passenger cars grew by 4.5%, commercial vehicles witnessed a 10% reduction in production.

-In this environment, while FAW Bharat Forge generated profits, the absolute levels were lower than what was recorded in CY2010. On a positive note, FAW Bharat Forge introduced some new products in the market, which were well accepted. It also managed to secure some new external customers.

<USA>
-To improve the performance of Bharat Forge America, the Company undertook various initiatives including but not limited to investments in new product and process development at Bharat Forge America and successful negotiation of Union Labour contract with substantial reduction in wage cost.

-However, due to prolonged recessionary conditions in US automotive markets for the products manufactured by Bharat Forge America, it might be difficult for Bharat Forge America to achieve overall turnaround in immediate future.

R&D

R&D Expenditure

(in million Rs.)

	FY ended Mar. 31, 2012	FY ended Mar. 31, 2011	FY ended Mar. 31, 2010
R&D Expenditure	88.9	75.2	28.6
Total turnover (On a stand- alone basis)	37,520.7	29,935.5	18,887.4
Total R&D expenditure as a % of total turnover	0.2%	0.3%	0.2%

R&D Structure

-In 2010, the Company established its new R&D center "Kalyani Center for Technology and Innovation". In the next 2-3 years, there are plans to increase efforts in organizing different types of technical laboratories in this center.

Investment Activities

Production capacity

-As of Mar. 31, 2012, the Company is operating at over 75% utilization levels for both forging and machining operations for the auto component business.

-The Company is executing Rs. 500 crore investment programs over FY ended Mar. 31, 2012 to FY ended Mar. 31, 2013 for capacity enhancement. Most of this is in machinery and facilities that add value to the existing product range.

-On pure capacity addition in forging, the Company is installing an additional 10,000 ton press. The machining capacity is also being expanded as part of the investment program.