Quarterly results

For the quarter ended March 2005, Sona Koyo Steering Systems reported a topline growth of just 12% at Rs 97.74 crore, whereas the bottomline was flat growth at Rs 6.17 crore as against Rs 6.20 crore in the corresponding period of previous quarter. The increased sales were because of rise in exports from 11.15 crore to 14.99 crore. Operating profit margin of the company improved from 12.5% to 13.0%. On the Cost front the Raw Material cost, (as a percent of sales net of stock adjustment) were 66%, down by 100 basis points. The Staff cost increased from 8% to 9%, whereas the Other Expenditure declined by 100 bps at 12%. Thus operating profit increased by 18% at Rs 12.98 crore.

The Other Income was declined by 26% at 1.48 crore. Other income included a foreign exchange gain of Rs 0.35 crore. The Net Interest Expenditure rose by 31% at Rs 1.09 crore. The Depreciation was higher by 19% at Rs 2.98 crore. This resulted in the PBT to take a leap of 11% at Rs 10.04 crore. The Total Tax outgo was up by 38% at Rs 3.87 crore. Thus the PAT was flat at Rs 6.17 crore as against Rs 6.20 crore in the corresponding period of previous year.

Annual Results

For the Year ended March 2006, the sales of the company recorded a 14 % increase in sales at Rs 339.68 crore. The efforts that the company has taken in the field of exports have bore its fruit and the company has achieved an Export sales of Rs 50.02 crore as compared to Rs 25.39 crore, in the corresponding previous period of previous year.

The operating profit margin just declined by 60 basis points at 11.1%. On the Cost front the Raw Material cost, as a percent of sales was declined from 69% to 68%. The Other Expenditure and staff cost were constant at 12% and 8% respectively. Thus OP increased by 11% at Rs 37.93 crore.

The Other Income fell by 2% at Rs 2.93 crore. Other income for the year included a foreign exchange loss of Rs 0.27 crore .The Net Interest Expenditure was up by 103% at Rs 5.05 crore. The Depreciation was higher by 16% at Rs 10.74 crore. This resulted in the PBT to showing a marginal fall of 1% at 25.07crore. The Total Tax increased by 2% at Rs 8.81crore. Thus the PAT fell by 2% at Rs 16.26 crore.

Recent Developments

Sona Koyo Steering Systems plans to set up a subsidiary in Europe. The firm projects export orders worth 30 million by 2008 from Europe. The subsidiary may come up in France.The group picked up 21 per cent equity in Fuji Autotech France last year, which has subsequently come down to 17 per cent.

Sona Koyo Steering Systems has announced an ambitious investment plan of Rs 400 crore over a period of 4 years. The group also announced the setting up of Sona AutoComp Inc, USA, a joint venture of all group companies and unveiling of its new visual identity. The investments will be towards the company's current capacity expansion plan in its various facilities and new locations.

The capex plan for the current year will be 100 crore of which 60 crore will be invested at Dharudhera Rs 20 crore at Gurogeon and Rs 20 crore at Chennai.The expansion plan at Dharudhera will involve localization of a part which is currently imported from Japan.

Outlook

In Spite of substantial volume growth, auto component majors are facing pressure on margins owing to tough competition and volatility in input prices. Component majors Sona Koyo and others are offsetting the pressure on margins by penetrating new markets and improving internal efficiencies to offset pressure on profitability. Most of them are consolidating their domestic market position and are trying to exploit outsourcing opportunities in export markets.

Valuation

The Company declared a dividend of 50% on a Rs 2 share .The board also recommended a bonus of one share for every one share held. The scrip is currently trading at Rs 94 on BSE.