SKF India - Not Rolling Smoothly

SKF India - A Growth In GDP Story

SKF India Ltd, the Indian subsidiary of the Swedish global engineering major, reported a decline in net profit at Rs 10.24 crore for the quarter ended December 31, 2005 as compared to Rs 15.70 crore for the same quarter last fiscal.

However, total income rose 52.96 per cent to Rs 259.08 crore for the fourth quarter this fiscal from Rs 169.37 crore during the year-ago period, the company informed the Bombay Stock Exchange. The revenues are not strictly comparable as the Q4CY2005revenues include revenues from the indenting business, which hitherto wasconducted on a commission basis and was included in the other income. Hence there should be a significant jump in the revenues and a significant drop in the otherincome (down 56.5%). The raw material cost during the quarter also includes a sum of Rs10.23 crore representing the cost of traded goods sold in the previous quarters. This should be treated as an extraordinary item and accounted for below the line. Further there is also a one-time expenditure of Rs4.08 crore towards contribution to the superannuation fund due to a change in the accounting practice. Consequently the total extraordinary charge during the quarter is Rs14.3 crore.

The operating profit margins (OPMs) for the quarter declined by 130 basis points primarily on account of the change in the treatment of the indenting business. As indenting is more or less a trading business the margins in the same are comparatively low. Consequently the raw material cost as a percentage of sales has increased from 48.7% to 54.9% during the quarter. However due to the stable other cost, the operating profit during the quarter has jumped by an impressive 39.4% to Rs35.3 crore.

For the year ended December 31, 2005 the company posted a net profit of Rs 64.07 crore as compared to Rs 56.61 crore during last year. The total income increased to Rs 816.01 crore during the current year from Rs 604.32 crore last year. The company's board has also recommended a 35 per cent dividend.