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N Madhavan
Chennai, July 21: A 30 per cent increase in sales has helped commercial-vehicle major Ashok Leyland to cut its losses for the first quarter ended June 30, 1999 to Rs 16.22 crore against Rs 33.20 crore in the corresponding period of the previous year.
The company in the first three months of the current fiscal sold 6,710 vehicles compared with 5,199 vehicles in the first quarter of 1998-99 due to revival in some user segments such as cement and most importantly absence of the usual "March overhang."
Manufacturers did not resort to the usual volume push in March '99 as their stock levels were not exceedingly high due to better inventory management. As a result the market was not saturated with excess stock. The company exported 392 vehicles against 303 numbers in the previous first quarter.
In rupee terms, the turnover grew 30 per cent to Rs 476.34 crore (Rs 367.83 crore). Operating profit was Rs 24.05 crore (Rs 14.55 crore) and the margins at that level registered a marginal increase of about 1 percent.
THe company has managed to effect substantial savings in interest cost which has declined from Rs 31.03 crore in first quarter of 1998-99 to Rs 21.54 crore. This was possible due to prepayment of certain high cost debts by the company last year. Working on much lower inventory has also saved carrying cost and working capital requirements have also been moderate as the industry is yet to witness a total revival.
Lower interest cost enabled the company to post a gross profit of Rs 3.04 crore compared with a loss of Rs 15.31 crore. Depreciation was slightly higher at Rs 19.26 crore (Rs 17.89 crore).
The performance of the company seemed to have fallen short of market expectations. The scrip which closed at Rs 105.60 on Tuesday opened at the days high of Rs 110.90 but fell 7.99 per cent to Rs 97.15 before closing at Rs 98.40 after the results were announced. About 7.61 lakh shares were transacted and there are currently 1.40 lakh seller and 10,000 buyers at current levels. The counter which was rulingat Rs 30 levels a few months ago shot up to Rs 100 levels on reports of turnaround in the fortunes of the commercial vehicle industry.
INSIGHT
A safe bet
The truck maker has seen a 29 per cent growth in sales volumes for the first quarter. Secondly, the company's operational performance is also quite impressive. Leyland has posted a gross profit of Rs 3.04 crore, compared to a net loss of Rs 15.31 crore in the corresponding quarter last year. The benefits of stringent cost control, lower inventory costs and prudent working capital management are also clearly reflected in the improvement in operating margins from 3.96 per cent to 5.05 per cent. Thirdly, Leyland has garnered a market share of 38 per cent (improved from 24 per cent), at the expense of market leader Telco.
Lastly, with Telco diversifying into the highly-competitive passenger-car segment, Ashok Leyland now is the only automotive major focussed solely on the commercial-vehicle segment. With the M&HCV segment in commercialvehicles (where Ashok Leyland competes) recording a postive growth trend for the seventh consecutive month since December 1998, an investor who wants an exposure to the sector will settle on the Ashok Leyland scrip.
-- Percy Dubash
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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