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Business News/ Opinion / Online-views/  Exide slips on all fronts in Q2
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Exide slips on all fronts in Q2

Exide slips on all fronts in Q2

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Nothing seems to have gone right for Exide Industries Ltd in the September quarter (Q2). A decline in volumes across business segments, coupled with the impact of high-cost inventory, resulted in an extremely poor operating performance.

Volumes dropped by 6% in the automotive segment, which accounts for about two-thirds of Exide’s sales. The management said demand from both the original equipment (OE) and replacement market was poor during the quarter. Meanwhile, the industrial segment that caters mainly to the telecom, power generation and construction industries, too, registered a 5% dip in volumes.

According to analysts, the sharp increase was due to high-cost inventory and higher conversion costs per unit. Operating profit margin fell by as much as 1,410 basis points to 7.7% during the quarter. One basis point is one-hundredth of a percentage point.

Sequentially, too, margins dipped by a huge 1,020 basis points. Net profit for the quarter fell by 76% year-on-year to 51.2 crore.

Also See | Losing track (PDF)

More importantly, the outlook appears bleak for the next few quarters, despite the fact that lead prices have cooled off a bit. The company said that it will take about eight months to regain the 4% loss in its market share in automotive batteries during 2010-11. If volumes fail to pick up, then the price cuts taken to push sales may hit profitability further.

Given this backdrop, brokerages have downgraded earnings by 40-50% for the current year; which explains why Exide shares have been punished after its results.

Graphic by Yogesh Kumar/Mint

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Published: 25 Oct 2011, 09:24 PM IST
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