Low demand effects SKF Bearings's 1QFY02 net - Views on News from Equitymaster

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Low demand effects SKF Bearings's 1QFY02 net

Apr 24, 2001

SKF Bearings, a leading player in the auto ancillary segment has reported a net profit of Rs 17 m for 1QFY02 , a decline of 50% YoY. The main reason for this is an overall slowdown in the automobile segment which has depressed both OEM as well as replacement demand. Though the company did feel an improvement in demand from certain OEM segments in this quarter, replacement demand continued to decline.

(Rs m) 1QFY01 1QFY02 Change
Sales 923 842 -8.8%
Other income 24 46 91.7%
Expenditure 735 725 -1.4%
Operating profit (EBDIT) 188 117 -37.8%
Operating profit margin (%) 20.4% 13.9%
Interest 72 47 -34.7%
Depreciation 102 92 -9.8%
Profit before Tax 38 24 -36.8%
Other adjustments 0 35
Tax 4 42
Profit after Tax/(Loss) 34 17 -50.0%
Net profit margin (%) 3.7% 2.0%
No. of Shares (eoy) (m) 2.5 2.5
Diluted number of shares 2.5 2.5
Diluted Earnings per share* 54.0 27.0

As a result the company's net sales dipped by 8.8% to Rs 842 m in 1QFY02. Even though the company has managed to contain its overall costs by reducing staff and raw material expenses, its operating margins have declined from 20.4% in 1QFY01 to 13.9% in 1QFY02 resulting in a 38% drop in operating profits to Rs 117 m in 1QFY02.

The company's net profit decline would have been worse off had it not been for a 92% increase in other income as well as extraordinary gains due to sale of the company's property and reversal of costs related its VRS as they had provided extra provisions for this in 4QFY01.

On the current price of Rs 308, SKF Bearings is trading at 11.4xFY01 EPS of Rs 27.

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