Financial Daily from THE HINDU group of publications
Saturday, Oct 26, 2002

Port Info

Group Sites

Corporate - Performance

Leyland: Cost control, volume growth show the way

Raghuvir Srinivasan

STRONG volume growth, a tight leash on costs and a constantly improving product mix are the three main factors responsible for the good performance of Ashok Leyland Ltd (ALL) in the second quarter. In fact, it has been a strong performance on the earnings front masked only by an extraordinary charge for VRS expenditure.

Earnings before tax and extraordinary charge has shot up by a massive 68 per cent to Rs 37.68 crore in the quarter ended September 30. However, this drops to a more sedate 13 per cent growth at the post-tax level following the VRS charge and a tax burden that has more than doubled compared to the same period last year.

The increased offtake of commercial vehicles, especially goods carriers, has pushed up ALL's volumes in the second quarter by 12 per cent to 8,139 vehicles. Though overall volume has grown by 16 per cent in the first half of this fiscal, offtake of passenger vehicles is still a cause for worry - it grew by a piffling four per cent in the same period. The passenger vehicle business is one of the strengths of ALL; but for the low offtake there, ALL would have seen a higher growth in the top-line.

Much of the bottomline growth is directly attributable to the tight leash on costs - financial and manufacturing. It is interesting to note that raw material costs have actually dropped by a marginal one per cent when sales volume has shown a 12 per cent growth. This shows the extent of clamp-down on costs by the company. Ditto with financial costs, which has dropped by a sharp 24 per cent to Rs 16.3 crore (Rs 21.5 crore) in the second quarter. In fact, cost control has been a feature of ALL's performance in recent times. While it helped the company show a better-than-industry performance at a time of falling volumes, it is now adding handsomely to the bottomline when volumes are on the upswing. The upswing in the commercial vehicle industry's fortunes seems to be sustaining. Demand from the construction industry and replacement demand is keeping up volume growth even as the flat trends in passenger vehicles is acting as a drag.

Going forward, ALL appears to be on track for a similar strong earnings performance in the second-half of this fiscal. A return of volumes in passenger vehicles, along with the tremendous benefit flowing from its cost control programme, should see ALL performing better in the remaining two quarters of 2002-03.

Send this article to Friends by E-Mail
Comment on this article to

Stories in this Section
Emerson Network offers `uptime' solutions to cos — `Downtime' loss estimated at Rs 20,000 cr

WeP printer sales top 1 m
Only listed cos may be allowed to offer IDRs
SC reserves KIOCL verdict for Tuesday
Pending wage settlement — HLL Garden Reach unit workers threaten strike
ICCL in talks with FIs, lenders for debt revamp
Setting up merchant washeries — Monnet Ispat in talks with CIL
Chemplast PVC project approval hits eco hurdle
VocalTec opens office in New Delhi
SEBI to speed up enquiry into L&T insider trading
Indian Hotels comes out of post-Sept 11 blues
Ashok Leyland: e-com, ratings are next priorities
Hindustan Lever: Accounting change trims decline in topline figure
Leyland: Cost control, volume growth show the way
Tax refund brings SCI back in black
M&M rolls out petrol version of Scorpio

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line