Mumbai: Battery maker Exide Industries reported a 4.6% fall in Oct-Dec net, missing analysts’ forecast, as demand from automakers forced it to deploy capacity away from the more profitable after-market business.
Reacting to the earnings, shares of the auto and industrial battery maker plunged as much as 18.9% in a firm Mumbai market. Conceding that the company is “passing through challenging times”, managing director T.V. Ramanathan said in a statement that in addition to capacity diversion, below expected performance of certain segments in industrial batteries also hit the earnings.
Its net profit during the quarter was Rs 1.24 billion compared with Rs 1.30 billion a year ago and way below a Reuters poll forecast of Rs 1.73 billion.
Sales, meanwhile, rose about 15% to Rs 10.49 billion.
At 2:38 p.m., the stock was down 11.35% at Rs 137.05 while the 30-issue benchmark BSE Sensex was up 0.62%.
“The company was ultra-cautious in passing on the lead cost push to the market in the auto replacement segment since the market share in replacement segment was already vulnerable due to capacity constraint,” he said.
Ramanathan, also Exide’s chief executive, termed the demand increase from original equipment manufacturers as “unprecedented and sustained”.
Exide has been struggling to keep pace with Indian automakers’ increasing need for batteries over the past 18 months.
For FY11, Exide has lined up a capital expenditure of Rs 4 billion, much higher than what it had spent in the previous years to meet demand from a booming auto industry, where the sales surged a record 31% in 2010.
The company has started operations at a new motorcycle battery manufacturing plant at Ahmednagar, in Maharashtra, he said.
“To us, building sustaianable and long-term relationship with the major players in the automotive industry are of greater importance than short-term profit motives,” Ramanathan said in the statement.
Exide is expanding capacity across its six manufacturing facilities in India and expects to add fresh capacities by April 2011 which would “mitigate the capacity constraints to a large extent”.