HMT Bearings Reports Fiscal 2006 Results

HMT Bearings Reports Fiscal 2006 Results Hindustan Machine Tools Group Ltd. (HMT, India) reported results for fiscal 2006, period ended March 31, 2007. Sales were up more than 6% from fiscal 2005, to Rs 6.1 billion from Rs 5.8 billion. The target sales growth for this coming fiscal 2007 remains 24%. State-controlled HMT is made up of several subsidiaries: Machine Tools, Watches, HMT International, Praga Tools, HMT Chinar Watches Ltd., and HMT Bearings. All are under a long-term, government-funded turnaround effort. Only two -- HMT Bearings and Praga Tools -- are believed to show any real potential for long term survival, absent government-funded support. They are all operating under control of the Board of Reconstruction for Private Sector Enterprises (BRPSE). HMT Bearings Ltd., located in Hyderabad, manufactures ball bearings, tapered roller bearings, and cylindrical roller bearings in sizes from 20mm to 260mm OD. HMT Bearings reported fiscal 2006 sales of Rs 300 million (USD $7 million). Profits or losses for that specific division were not immediately revealed. However, as late as last month, officials had been saying they expected HMT Bearings to report dramatically higher fiscal 2006 sales -- in the range of Rs 400 million to Rs 450 million ($9 million to $10 million). For fiscal 2007, the BRPSE has given HMT Bearings an even more unrealistic sales target of Rs 500 million (USD $11 million). Observers told eBearing they believe the BRPSE advertises overly optimistic sales targets for HMT Bearings, hoping potential buyers will see the targets but ignore actual sales. Even though sales targets are improbable, the government has assured raw material and component parts vendors it will infuse the necessary cash to keep HMT Bearings solvent. The company has repeatedly said there is sufficient customer demand to push sales far higher, but only if it is able to overcome chronic materials and parts shortages caused by poor cash flow and the resulting inability to pay its suppliers. Even now, HMT Bearings said it lacks sufficient free operating capital to continue doing business unless it has guaranteed government funding. Overseen by the BRPSE, HMT Bearings' revitalization plan has just recently been approved by the Indian Cabinet Committee on Economic Affairs and funded with Rs 520 million (USD $11.5 million) -- Rs 170 million for CapEx and Rs 100 million for working capital. As set up in 2005, HMT Bearings faced a December 2006 restructuring deadline to find a strategic partner, a deadline it obviously missed: