BackExide: earnings growth led by margin expansion
Exide: earnings growth led by margin expansion
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A senior company official pointed out that sales volumes of batteries grew by around 15% over the previous corresponding period. This essentially reflects the surge in auto volumes, mainly the passenger segment. Around 60% of Exide’s revenue accrues from the auto segment where it commands a 65% share in the organized battery market.
Exide’s operating profit grew 90% over the previous corresponding period to Rs218.71 crore. This is despite the fact that lead has risen from around $1,500 a tonne in April to around $2,500 at present. While the company imports around 30% of its lead requirements, the share of lead used from its captive smelters has increased from 30% to around 45%, helping lower raw material costs. This move has also reduced its dependence on lead availability.
While raw material costs rose from around 58% of sales in the second quarter to 66% in the third quarter, it was lower by 4% over the year before period, when lead prices were at similar highs. Besides, Exide’s efforts to increase its presence in the replacement markets throughout the country have also contributed to higher operating profit margin (OPM), given that margins in replacement markets are higher than in the original equipment segment.
Hence the OPM for the December quarter was at around 24% compared with around 15% in the year-ago period. The only negative is the rising lead price and volatility in availability.
Exide’s earnings per share for the nine months is around Rs5, well above the Rs3 posted for the full year 2008-09. Given the momentum in the automotive and power sector, both sales and earnings growth are expected to continue into the fourth quarter too. The company’s shares closed nearly 5% higher at around Rs121 on Monday in a flat market.
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