The Hindu Business Line : Price rise, shift in product mix drive Ashok Leyland net up 41%

ASHOK Leyland Ltd has registered a 41 per cent increase in net profit and a 16 per cent increase in income from operations for the third quarter of this financial year over the same period last year.

For the nine-month period ended December 31, 2004, its net profit increased by 21 per cent and sales by 20 per cent over the same period last year.

In a press release, the company said it sold 12,831 vehicles during the third quarter against 12,489 in the same period last year. Despite the marginal increase in the number of vehicles sold, the company recorded a healthy growth in profit after tax mainly because of a shift in product mix and a price increase effected in November 2004.

The release quoted Mr R. Seshasayee, Managing Director, Ashok Leyland, as saying that shift in product mix and pricing action compelled by input cost increases were the two major factors that contributed to improved turnover.

"We have countered pressures on margins with price corrections as also cost containment through e-sourcing and value engineering. Low cost funds availability thanks to our FCCN issue has helped us reduce financial costs nearly by 60 per cent," he said in the release.

He said that the company had realised the capacity enhancement effected almost entirely through productivity-linked settlements at its Bhandara and Hosur I units, enabling a record output of over 5,600 vehicles in December 2004. "Market has remained buoyant and operations continue to be at full capacity utilisation," he said.

When contacted, Mr K. Sridharan, Executive Director-Finance, said the benefits of the company's efforts at e-sourcing, started in July 2004, through a reverse auction process had started trickling in and the full benefits would be felt in the next financial year.

He said Ashok Leyland had reached its production capacity of 67,000 vehicles and with outsourcing of some non-value adding work, it would be able to produce about 75,000 vehicles by the first quarter of the next financial year and stabilise this production by December 2005, when the second phase of capacity expansion would be completed.

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