Ashok Leyland net drops 21 per cent at Rs 381 crore in Q3

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Published: February 15, 2019 5:03:04 AM

Ashok Leyland on Thursday reported a 21.45% year-on-year (y-o-y) decline in standalone net profit at Rs 380.84 crore for the December quarter.

ashok leyland, nbfc, commercial vehiclesCommercial vehicle demand during the quarter fell due to higher interest rates and liquidity crunch at non-banking financial institutions (NBFCs).

Ashok Leyland on Thursday reported a 21.45% year-on-year (y-o-y) decline in standalone net profit at Rs 380.84 crore for the December quarter.

The profit was driven down by a drop in revenue of 12% y-o-y owing to a decline in volumes at 6% y-o-y. Other income for the quarter was down 42% y-o-y, but the company benefited from a smaller tax outgo.

The profits were, however, higher than Bloomberg concensus estimates of Rs 275 crore. The Leyland stock closed 7.03% higher at `84.50 on the BSE after the announcement of results. In intra-day trade, the stock was ruling nearly 10% higher than Wednesday’s close.

Revenue from operations fell 12% y-o-y to Rs 6,325.24 crore during the October-December quarter as sales volumes dipped 6.1% y-o-y.

Operating profit margins for Q3FY19 contracted 140 bps y-o-y to 10.3%, pushing down the Ebitda (earnings before interest, tax, depreciation and amortisation) by 22.5% y-o-y to `650 crore. This was worse than analysts’ expectations who had forecast margins would decline by 60-90 bps to 10% on lower volumes and higher raw material costs. Raw materials as a share of net sales jumped 300 bps.

Other income during the quarter was down by 42.5% y-o-y to `80 crore while tax expenses declined 55.5% to Rs 106 crore.

Ashok Leyland CFO Gopal Mahadevan said total industry volumes for the quarter were lower by 7% y-o-y owing to the high base in last year. “There were twin challenges of pricing pressure and higher input costs,” he added.

In December, 2017, the Chennai-headquartered auto player witnessed pre-buying, prior to the introduction of new regulation on mandatory air-conditioned cabins from January 2018. Later, manufacturers were given an option of either fitting an air-conditioning system for the cabin or with the truck cabin ventilation system.

The company’s sales volumes declined to 43,763 units in Q3FY19, impacted by tight liquidity conditions and revised axle load norms, which increased the freight carrying capacity. Medium & heavy commercial vehicle (M&HCV) sales volumes were down 17% y-o-y to 29,810 units and light commercial vehicle (LCV) sales increased 27.7% to 13,953 units y-o-y.

Commercial vehicle demand during the quarter fell due to higher interest rates and liquidity crunch at non-banking financial institutions (NBFCs). Around 90% of the CV sales are financed. Besides, the government increased the official maximum load carrying capacity of heavy vehicles, due to which fleet owners postponed their orders across the country.

Analysts at Jefferies had said margin pressures will compound the impact on earnings with Ebitda expected to decline across most OEMs and Ashok Leyland likely to be the worst-hit. Leyland has a market share of 50% in the 35.2 tonne and above vehicle segment, which faced the maximum headwind due to poor credit availability.

After Q2FY19 results, the company’s management had said demand has slowed down over the past months due to credit crunch and discounting which has been rampant in the industry, thereby hurting margins.

Analysts at Morgan Stanley had said higher raw material costs impacted gross margins.

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