Ashok Leyland to more than double capacity

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Thursday , May 08, 2008 at 1505 hrs Ashok Leyland, India's second-biggest bus and truck maker, will spend 30 billion rupees ($721 million) in capex over the next three years to more than double capacity from 84,000 vehicles now, it said on Thursday.

The Chennai-based company, which trails leader Tata Motors Ltd will launch its iBus this year and also extend its range of tractors, it said in a statement.

Leyland earlier on Thursday reported a better-than-expected 5 percent rise in its fiscal fourth-quarter net profit to 1.81 billion rupees from 1.72 billion a year earlier.

Net sales rose to 25.62 billion rupees from 22.91 billion.

A Reuters poll had forecast net profit of 1.68 billion rupees on net sales of 24.26 billion.

Its operating margin, a key measure of profitability, expanded by 60 basis points to 10.4 percent.

"In terms of topline, we compensated for the slowdown in the truck market by significantly improving our share of the bus market, international operations, as also the engines and spares businesses," said Managing Director R. Seshasayee.

"Our bottomline benefited from some aggressive value engineering, sourcing initiatives and higher productivity."

Leyland, which has ventures with Japan's Nissan Motor Co for trucks, engines and components, said full-year net profit rose 6 percent to 4.7 billion rupees.

Vehicle sales during the March quarter rose 4.5 percent to 27,311 units. Higher interest rates have weighed on demand for buses and trucks in the past year, as banks tightened credit.

But a growing focus on improving India's network of roads and highways is helping, Seshasayee said.

"We are seeing a high growth in light trucks and heavy trucks, with the middle order getting squeezed," he said.

"Margins continue to be under pressure. (But) if the revival comes, capacity won't be a constraint for us," he said.

Ashok Leyland's bus assembly unit in the UAE will commence operations this year, with capacity being doubled to 2,000 units.