LAL posts best ever results in 4Q

Posting their best results since inception, Lanka Ashok Leyland, fourth quarter earnings passed the Rs.389 million mark, (before tax,) up a staggering 1178% compared to Rs. 30.4 million for the same period last year.

Umesh Gautam - CEO of Lanka Ashok Leyland states that the driving revenues for the quarter was a 106% increase in new vehicle sales to Rs. 6.5 billion from Rs.3.1 billion for the same period last year and a 343% increase in vehicle spare part sales and diesel generator sales combined.Vehicle repair income improved a modest 34% over the same period.

Despite the steep Rupee devaluation, rising interest rates, and restricted availability of finance Lanka Ashok Leyland has managed to a gross profit margin of over 10% for the quarter and a net profit margin of around 4.5%. The 10% gross profit margin is lower by 400 basis points for the same period last year and is slightly below the gross profit average of 12% for the whole year. The net profit margin for the year ending March, 31 2012 was 7.4%. Commenting on this, Gautam, stated that “the company has done well despite being adversely affected by the steep devaluation of the rupee and high interest rates. Fundamentally, the business is still very strong and we are seeing a lot of demand, but the increase in our finance costs is placing downward pressure on our margins. Additionally, the devaluation of rupee has negatively impacted the sales.

Short term borrowings grew a 172% from Rs. 900 million to over Rs. 2.4 billon. Gautam justified that “despite high interest rates, our customer base continues to increase. Having budgeted for higher demand, we have a higher inventory figure as a result which is normal. “

With regard to the outlook for the coming year, Gautam said “the government has taken some hard and necessary measures to prevent the economy from further overheating and to avoid bigger balance of payment problems.”

“Our fundamentals are intact and strong so we do not necessarily view the current economic climate as a big problem, more like a temporary adjustment. Of course, if we don't see the current situation improve towards the end of the year, then we'll have to re-evaluate our business plan.”

Looking forward, Gautam highlights as per the management commitment all the profits are being used to aid the Sri Lankan Transport board in their efforts to improve the public transport sector.

This initiative, successfully started early 2011, has proven to be an effective solution to the transport problem without burdening the treasury and LAL is committed to help the Government of Sri Lanka by continuing to supply buses without any down payment, instead working on a daily collections payment basis.

As demand for LAL vehicles continue to remain robust, LAL look set to continue their impressive set of results for the rest of the fiscal year.