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Chennai, Oct 21 Hinduja Group flagship Ashok Leyland witnessed drop in net profit for its second quarter primarily due to doubling of interest costs and losses on account of foreign exchange fluctuations.

Sales were higher. Raw material cost as a percentage of net sales during the quarter increased to 89 per cent against 82 per cent during the same period last year. The company’s Managing Director, Mr R. Seshasayee, has said in a press release that Ashok Leyland was able to get price increase despite demand contraction.

A further price increase of about 2 per cent was effected in October.

In the notes to the statement of accounts, Ashok Leyland has said that the company had changed its policy for accounting for ‘cash flow hedges’. Earlier, the company would charge any gains or losses arising out of hedging transactions to the profit and loss account. However, with effect from April 1, 2008, such gains and losses would be taken to a Hedge Reserve Account, “till the underlying forecasted transaction occurs”.

If the company had not changed its accounting policy, its net profit for the quarter would have been lower by Rs 21.60 crore, the statement says.

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