Last year, Exide Industries failed to take full advantage of booming demand from the automotive sector due to paucity of capacity and even sacrificed margins to mitigate rising demands from a less profitable OE sector.

On the first quarter of 2011-12, the net profit declined marginally due to “sluggish” OE demand in automotive sector and a drop in sales of inverter batteries in the peak summer months.

In a press release issued on Wednesday, the company announced that during the April-June 2011 period, the net profit of the company declined by 1.3 per cent to Rs 163 crore compared with the corresponding period of the previous year.

The turnover had increased by 8 per cent to Rs 1,244 crore.

Sluggish offtake

Mr P.K. Kataky, Director Automotive, OE (original equipment), told Business Line that demand was sluggish due to the dual impact of labour problem at Maruti's Manesar plant and steady increase interest cost on auto-loans.

Overall, the automotive batteries sector grew by 15 per cent. While the expanded 21 million (10 million) motorcycle battery manufacturing capacity is fully utilised, the 12.2 million (8.8 million) automotive battery capacity is “near” full utilisation levels.

However, the 1.5 million newly built facility to manufacture batteries for electric automobiles is near unutilised in the absence of demand. Also running below capacity is the inverter battery capacity.

Inverter battery

A not-so-hot summer this year had substantially impacted the sales of inverter batteries this year, he said. (It may be mentioned that a cooler summer had also resulted a dip in AC sales in 2011.)

The company, however, is confident that “the setbacks are short term” in nature. “The demand contraction reduced the company's ability to pass on, in full, the (increased) cost of lead. These factors dampened the sales and profitability,” the company's Managing Director and CEO, Mr T.V. Ramanathan, was quoted saying in a press release.

“However, we feel these setbacks are short term. Our faith and confidence in the vibrancy of the Indian economy is very strong. There is no reason to worry about the longer term growth prospects of the company,” he said.

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