Ashok Leyland Ltd (ALL) registered a fall of 52.5% y-o-y in net sales to Rs12.2 billion driven by 60.4% y-o-y fall in total volumes. During Q4 FY09, ALL sold 9,136 vehicles in the domestic market, down 63.2% y-o-y.
The company exported 1,665 vehicles, lower by 32.5% y-o-y. Higher revenues from the engines and spare part segments along with better realizations for the vehicles segment, helped reduce the impact to some extent.
Realizations were higher aided by improved product mix towards the bus segment, which command higher prices vis-à-vis truck segment.
Out of the orders issued by JNNRUM for 5,300 buses, ALL has bagged orders for 2,800 buses. The company expects to receive orders for about 4,000-5,000 buses.
As compared to a fall of 61.2% y-o-y in operating profit, PAT was down 70.5% y-o-y. This can be attributed to 383% y-o-y jump in interest cost.
Interest expenses were higher as working capital levels were significantly high on account of unanticipated rise in inventory levels. The impact of higher interest cost was offset to some extent on account of one-time tax reversal of Rs224 million.
The company qualifies to pay MAT for FY09. Consequently, it reversed excess tax paid in H1 FY09. The company adopted AS 11, due to which Rs505 million foreign exchange loss was not accounted for in the P&L account.
The management has guided for a sales volume growth of -8% to 8% for FY10, which clearly reflects the high degree of uncertainty with respect to volume growth. For CV demand to pick up in the country, it is imperative that the industrial activity gathers momentum.
With a stable central government, we believe infrastructure activities would attract substantial investments.
However, with credit availability continuing to remain tight, demand might remain subdued. Nonetheless, margins could expand on account of lower raw material cost.