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The Bearings Industry as a whole reported mediocre results for the quarter ended Dec’07 primarily on the back of slow down in the Indian industry in general and major user industry auto sector in particular. The growth in industrial production during the period from Apr’07 to Dec’07 decelerated to 9.01% from 11.16% in the corresponding previous year period. There was a drop in sales of two-wheeler during the quarter under review. The domestic sales of two-wheelers for the month Oct’07, Nov’07 and Dec’07 was 3.7%, 2.1% and 8.3% respectively lower when compared with corresponding months last year. The slow growth IIP coupled with a slow growth in two-wheeler sales resulted in a muted sales growth for the Bearings sector.
The Aggregate Net Sales revenue of 7 companies and stood at Rs 726 crore which was 12% higher when compared with corresponding previous quarter last year. However the Aggregate OPM (Operating Profit Margins) declined 200 basis points to 15.0%. The subsequent Aggregate Operating Profit stood at Rs 109 crore which was 2% lower on Y-o-Y basis comparison.
The Aggregate Other Income increased by 70% to Rs 13 crore. The subsequent Aggregate PBIDT for the quarter ended Dec’07 stood at Rs 122 crore which was 3% higher when compared with corresponding previous quarter last year. The Aggregate Interest Income for the quarter under review stood at Rs 2 crore, while the Aggregate Depreciation charge increased by 6% to Rs 19 crore. The subsequent Aggregate PBT stood at Rs 105 crore, which was 5% higher on Y-o-Y basis. The Aggregate tax liability for the quarter under review stood at Rs 38 crore, resulting in a Aggregate PAT of Rs 66 crore which was 1% lower on Y-o-Y basis.
FAG Bearings reports unimpressive results for the quarter ended Dec’07
FAG Bearings reported unimpressive results for the quarter ended Dec’07 on the back of slow down in industrial production and two-wheeler sales. For the quarter ended Dec’07 FAG Bearings reported a 15% rise in net sales revenue to Rs 167.45 crore. The operating profit margin (OPM) decreased sharply by 740 basis points to 15.5%.
In terms of revenue breakup from the user Industry segment FAG bearings derives around 30% of its revenue from auto segment (only cars), around 50% from industrial segment (commercial vehicles, two- and three-wheelers and industrial applications) and the remaining 15% from the replacement market and trading. Negative growth of two-wheeler and commercial vehicles has affected the company’s results, as it form around 50% of its sales.
The operating margins of FAG bearings has been easing down consistently in the past three quarters from 23.3% in the quarter ended March 2007 to 22.2% in the quarter ended June 2007, which has further come down to 22.0% in the quarter ended September 2007, but has virtually crashed there from to 15.5% in the quarter ended December 2007. FAG Bearings reported 34% fall in profit after tax but before EO income to Rs 14.16 crore on 14% rise in net sales to Rs 167.45 crore in the quarter ended December 2007. The fall in the profits would have been steeper but for 945% surge in other income to Rs 3.03 crore during this period. The company has maintained dividend at 40% for 2007, same as in 2006.
SKF India buck the trend and reported good performance for the quarter ended Dec’07
Even though there was a slow down in Auto Sector, SKF India bucked the trend and reported firm performance for the quarter ended Dec’07. For the quarter under review, the Net Sales/ Income from operations of SKF India stood at Rs 420.05 crore, which was 11% higher when compared with corresponding previous quarter last year. The OPM (Operating Profit Margin) increased by 100 basis points to 14.5%.
The resultant Operating Profit for the quarter ended Dec’07 was Rs 60.95 crore which was 19% higher when compared with quarter ended Dec’06 figures. The ensuing PAT for the quarter ended Dec’07 was Rs 40.20 crore, which was 27% higher when compared with corresponding previous quarter last year.
SKF India is in the process of setting up 2 new facilities
SKF India is in the process of setting up 2 new facilities. The company is following the de-risking strategy by focusing on newer segments like Power Transmission, etc.
It is setting up a new facility at Ahmedabad to manufacture large size bearings that cater to wind energy, mining, steel and off-road applications. This Greenfield plant is at an investment of Rs.270 crore and is expected to start manufacturing by first quarter of 2009.
SKF India is also investing another Rs.150 crore in setting up a new plant at Haridwar, Uttarakhand. This factory will cater mainly to the automotive and 2 wheeler industry. The Uttarakhand plant is expected to become operational by March 2008 and will augment the existing bearings capacity by more than one-third.
Production lower on Y-o-Y basis
Over the last couple of months the ball and roller bearings production have been lower on Y-o-Y basis. For the months Nov’07 and Dec’07 the ball and roller bearings production stood at 236.56 lakh units and 247.87 lakh units respectively that was 8% and 5% respectively lower when compared with corresponding previous months last year. The average Ball and Roller bearings production for the Calendar year 2007 stood at 245.46 lakh units, which was 13% lower when compared with corresponding period last year.
Outlook
On account of the slow down seen in the IIP and auto sector the Industry reported mediocre results for the quarter ended Dec’07. However companies following the de-risking strategy by focusing on newer segments such as SKF India have a bright future ahead. Also, with interest rates easing from the peaks, the auto sector is poised to revive. Also, the expected launch of low cost Nano car by Tata will also spur the Indian auto sector, which will also add further sheen to the bearings sector.
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