The country’s second largest commercial vehicles (CV) maker Ashok Leyland failed to meet market expectations and reported a 61.7% drop in its net profit for the June quarter, on a year on year basis, due to disappointing sales during the period especially in the medium and heavy vehicle categories. Ashok Leyland (ALL) recorded a net profit of Rs 111.23 crore during the quarter, as against Rs 290.78 crore in the same period last fiscal. Operating profit fell 36.5% year-on-year to Rs 306 crore, with margins declining by 4% to reach 7.2% as compared to 11.2% in the same quarter last fiscal, dragging the stock down by 2.64% on the BSE at Rs 103.15. Revenue during the quarter fell moderately by 0.4% to Rs 4,514.4 crore from Rs 4,531.3 crore in same quarter last year. ALL missed estimates both in terms of net profit and EBITDA margins due to a 17% drop in sales in its medium and heavy commercial (M&HCV) category. During the quarter under review, the company registered sales of 19,877 units in this segment as compared to 24,027 units sold in the same period last fiscal. Though it gained a 21% growth in the LCV segment at 8,618 units during the quarter, total volumes declined 9% to 28,495 units as compared to 31,165 units sold in the same quarter in the previous financial year.
The firm also suffered from an impairment loss of Rs 12.56 crore on loans (including interest) to a subsidiary and a foreign exchange loss of Rs 2.67 crore on swap contracts as against a gain of Rs 49.67 crore from the year-ago period.Interestingly, the company achieved its highest ever Q1 market share of 34.7% during the quarter, driven largely by success of iEGR technology for BS IV engines launched in April 2017. “Next three quarters look promising as the demand is expected to pick up on the back of government spending on infrastructure as well as positive impact of GST,” the company said.
Vinod K Dasari, CEO and managing director, said that despite all the challenges, the market share growth exemplifies the technological leadership of the company. “With the success of iEGR technology, we are planning to ramp up capacity to cater to the growing demand.”Shrikant Akolkar, an analyst with Angel Broking said, “Ashok Leyland’s Q1 numbers have missed the street estimates significantly. Material cost per unit has accelerated faster than sales ie. by 10% y-o-y, which has impacted its profitability in the quarter. The poor result is mainly due to the 9% decline in the volumes in the quarter. While the company reported 11% growth in the volumes in June alone, there was a 19% decline in the volumes in the first two months of the quarter owing to the BS-IV transition and GST implementation. We, however, see pick up in CV volumes in the remainder of the year.