Mahindra Forging’s FY13 Numbers Dented

Mahindra Forging posted less-than-satisfactory results for FY13. The company posted a loss of Rs 114 crore for FY13 against a profit of Rs 51 crore during FY12.

In the fiscal, its revenues dipped by 9% to Rs 2096.8 crore against that of Rs 2308.2 crore in FY12. This decrease is largely due to the lower revenue from its European business. In fact, the revenues were down by as much as 13% if the currency translation gain due to appreciation of the euro against the rupee is not considered.

The company's total expenses have decreased marginally by 2.62%. However, the total expenses as a percentage of sales have gone up by 696 basis points to almost 103%. This increase is majorly due to higher employee costs, the change in finished goods inventory and other expenses as a percentage of the revenues. In actual terms, the employee cost increased by almost by 7.5% in FY13 from that in FY12.

On a consolidated basis, the company reported EBITDA margins of only 1.94% in the fiscal against 8.54% in FY12. Further, the finance costs, which increased by almost 14.5% due a considerable increase in the company’s long-term and short-term borrowings on a consolidated basis, have eaten into the earnings.

Interestingly, the company posted its highest quarterly margin of 18.2% in Q4FY13 on a standalone basis. However, the overall muted performance for the fiscal and its subsidiaries’ financials are pulling down the company's financial health on a consolidated basis. We advise investors to stay away from this counter.