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Higher raw material costs, slow sales pull TVS profit down 68%

Higher raw material costs, slow sales pull TVS profit down 68%
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First Published: Fri, Jun 29 2007. 12 04 AM IST
Updated: Fri, Jun 29 2007. 12 04 AM IST
Chennai: TVS Motor Co., the third largest maker of two-wheelers in India, said net profit for the fourth quarter (Q4) ended March fell 68% from a year-ago period on higher raw material costs and stagnant sales.
The company reported a net profit of Rs9.05 crore for the quarter, compared with Rs29.09 crore for the corresponding quarter of last year. Sales for the quarter rose 9% to Rs919.88 crore, compared with Rs839.27 crore in the same quarter last year.
Two-wheeler sales in India have fallen because of higher interest rates. At the same time, prices of basic rawmaterials such as steel,rubber and carbon have gone up, said Venu Srinivasan, the company’s chairman and managing director.
TVS’ net profit for the year ended March 2007 was Rs66.6 crore, compared with Rs117 crore last year. Sales for year rose 19% to Rs3,854 crore.
Srinivasan said the company planned to increase the number of its high-end models, even as rival auto maker Bajaj Auto Ltd said that it was looking to develop a small car in a bid to enter the passenger car market.
TVS planned to launch six new products over the next year, including a variant of one of its popular models, the Apache, an electric bike, and a passenger three-wheeler, Srinivasan added.
The company will also commence manufacturing at its Indonesia unit, which has a capacity of about 75,000 bikes, and expects this to contribute around Rs370 crore this year to sales.
“This result in not wholly unexpected,” said Umesh Karne, a senior research analyst at Mumbai-based Emkay Share and Stock Brokers Ltd.
Karne pointed out that both Hero Honda and Bajaj have shown a decline in profitability as well as revenue growth on account of an increased interest rate. The profitability had also been affected by a price war between the top three two-wheeler firms, he added.
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First Published: Fri, Jun 29 2007. 12 04 AM IST
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