Lanka Ashok Leyland (LAL) has posted a 14 per cent increase to Rs 317 million in net profit for the last (completed) quarter against Rs 279 million for the same period last year. The company is introducing the, once ubiquitous Double Decker buses in all the major cities.
“Even more impressive is a 48% increase in sales revenue for the quarter with a turnover of Rs 4.3 billion compared with Rs 2.9 billion in 2011. The company declared its’ highest ever dividend, Rs 60 or 600% of the share’s par value for the year 2011/2012,” it said in a statement.
However the cost of sales increased by a disproportionate 53 per cent to Rs 3.9 billion over 2011, reducing the gross profit margin to 9.2 per cent against 14.2 per cent earlier. Among the operational line items was a 116 per cent increase in administrative costs to Rs 81.7 million, up from Rs 37.9 million in 2011, largely due to the exchange rate loss.
“This was offset by a 443 per cent increase in other operating income of Rs 166 million over 2011, mainly due to a reversal of VAT accumulation,” the company statement said. LAL CEO Umesh Gautam said, ““While we are very proud of our 1st quarter results, we are not revising our outlook and targets for the year. Fundamentally, any upward revision will be more weighted on the macroeconomic factors becoming more favourable more than our ability to outperform. While reduced volatility with regard to the exchange rate may help control our exchange rate loss in the short to medium term, the depreciation will have negative effects on our sales over time.”
The company’s short-term borrowings increased by 757 per cent to Rs 439.8 million in the reviewed quarter.
“Inventories have been growing over the last few quarters. This is more to do with our budgetary allocation as we needed to increase inventory to cater to the increasing demand despite blocking up a lot of cash. There will be some pressure as a result of slower sales going forward which we foresaw last year. While demand continues to be strong, prevailing conditions continue to make it difficult for our customers.
We continue to monitor the economic situation. While the bulk of the exchange rate volatility may be behind us, a new equilibrium for the currency still remains to be seen,” Mr Gautam said.