Ashok Leyland’s Q4FY13 Numbers Decline

Ashok Leyland announced its Q4FY13 numbers on May 10, 2013. Over FY13, the demand has been extremely subdued in the Commercial Vehicles (CV) space. Since Ashok Leyland’s operations are primarily in this segment, the impact has been direct and visible in its financials.

In Q4FY13, the company’s sales volumes declined by 2.92% on a yearly basis. In terms of segments, the sales volumes of Medium and Heavy Commercial Vehicles (M&HCV) declined by 23.31% YoY. At the same time, the volumes of Light Commercial Vehicles (LCV) grew by a whopping 125.30% YoY. This helped cushion some of the impact. However, since the price of M&HCVs is much higher than that of LCVs, the revenues of Ashok Leyland have taken a hit.

In Q4FY13, its revenues declined by 13.88% to Rs 3728.46 crore when compared to the Q4FY12 figures. The EBIT declined by 73.74% to Rs 98.29 crore and the net profit declined by 42.02% to Rs 150.03 crore.

A point to note here is that the net profit of Ashok Leyland (although drastically lower) has been held up by the Exceptional Items. In the quarter ending March 2013, the Exceptional Items amounted to Rs 134.36 crore, way higher than that of Rs 1.6 crore in Q4FY12. If the effect of this were to be discounted, the net profits of Ashok Leyland would have shown a decline of approximately 95% YoY.

True, the LCV sales have been robust and Ashok Leyland’s Dost has been a success in the markets. But the demand drop in M&HCVs is the major laggard on the company’s performance. This will continue till there is improvement in the macroeconomic trends. Factors like fuel prices, interest rates, economic activity, etc. have resulted in the demand being extremely subdued.

The positive effects of the fall in global oil prices and the action on the interest rates front will come on only once the impact of these changes reaches the end consumers. Till then, the industry is expected to continue its disappointing performance. It would be best to avoid investing in this counter till the industry shows some signs of improvement.