Ashok Leyland, which makes trucks and buses, reported a 30% increase in sales to Rs 3,829 crore in the March 2011 quarter. The company sold 15% more vehicles during the quarter, compared to the March 2010 quarter.
The difference between volume and value sales could be explained either by a change in its product mix (selling higher value vehicles) or by an increase in prices.
An increase in prices does seem evident, as the company’s material costs increased at a lower rate than sales, by 28%. After its December quarter results, the company management had said that total price increases during the year (till January) was about 12%.
Strong economic growth –with both industry and agriculture doing well during 2010-11- has led to a 18% increase in medium duty cargo vehicles, which account for nearly 80% of domestic sales. Sales of passenger vehicle sales, mainly buses, have risen by just 2.6%. Total domestic sales rose by 14% while exports rose by 28%.
Ashok Leyland’s operating profit rose by about 35%, as price hikes took care of higher costs. Its operating profit margin, as a result rose by about half a percentage point, despite employee costs rising by 67%.
Despite sharply higher interest costs, a lower tax incidence helped the company’s net profit grow by 34%. On Thursday, Ashok Leyland’s share rose by about 4% as investors reacted to its results.
In a statement, the company said that 2011-12 will be a year of growth and consolidation and it will become a full-fledged CV-maker with the launch of Dost, a 1.2 tonne light commercial vehicle which will target the small-payload CV segment which has become very popular. Rising interest costs and higher diesel prices could affect growth, but Ashok Leyland says it is cautiously optimistic on the back of strong economic growth.