Expansion amidst Recession

Expansion amidst Recession Hansavivek ASSOCIATED BEARING COMPANY'S expansion and modernisation projects have been progressing as per schedule. First batch of sophisticated modular machines has been received and installed. Additional production should commence from this year, and when the schemes are fully implemented by 1985, the company's manufacturing capacity should increase by about 50 per cent. Meanwhile, after two successive years of growth, the company has suffered a setback in 1982. Gross profit has fallen back from the previous year's Rs 11.03 crore to Rs 7.89 crore following a comparatively moderate decline from Rs 39.31 crore to Rs 36.45 crore. There figures reflect a sharp deterioration of gross margins. With tax liability considerably reduced because of substantial capital expenditure incurred during the year, net profit has turned out to be higher at Rs 4.55 crore (Rs 4.32 crore). Unchanged dividend of 20 per cent is covered 2.59 times by earnings as against 2.45 times previously. The directors comment that while industrial production registered marginal growth during 1982, major beaing consuming industries faced a demand recession. The bearing market registered a negative growth of about one per cent and many of domestic bearing manufacturers had to operate their plants at reduced capacity levels. On the textile side, 1982 has been a year of labour unrest. Even the last quarter of 1981 witnessed a slackening of demand and at end of 1981 many mills were loaded with huge inventories. Lockout in the factory of company's biggest customer, which continued all through the year, coupled with the longest-ever textile mill strike in Bombay throughout last year, forced the company to cut back production of textile items. Since the beginning of 1983, however, there has been some marginal improvement in the working of textile mills and the company's ma' jor customer has resumed operations.