Lanka Ashok Leyland recorded a turnover of Rs 3.2 billion in the first quarter of 2018, against Rs 3.3 billion for the first quarter of 2017.
Vehicle sales saw a marginal decline year on year to Rs 3 billion whilst revenue from other sources rose 44% to R 118.4 million against Rs 82 million for the same period last year. Prudent cost controls boosted the gross profit by 22% to Rs 308 million and saw the gross profit margin expand to 9.7% against 7.8% recorded a year ago.
Operating expenses for the quarter stood at Rs 138.9 million , a 172% increase over the first quarter of 2017 which was benefitted from a one off reversal. Net finance costs for the quarter rose 553% to Rs 67.2 million as we took on more debt to expand our stock of technologically superior BS3 compliant vehicles with latest safety standards. Inventory position grew 30% to Rs 5.7 billion cf. 4.4 billion in the first quarter of 2017 while interest bearing liabilities have risen 99% to Rs 4.1billion against Rs 2 billion a year ago.
The increase in finance resulted in a profit before tax of Rs 51.7mn versus Rs 135.5mn in 1Q 2017, signifying a 51% decline year on year.
Umesh Gautam, CEO of Lanka Ashok Leyland, relayed “that the first quarters’ sales performance has historically been sluggish over the last few years.
This quarter witnessed larger than normal exchange rate volatility which affected pricing and influenced our customers buying decisions. Despite these constraints, our vehicle sales continued to top the Rs 3 billion benchmark. Our bottom line does not fairly reflect the progress the company has made over the quarter which witnessed margin expansion at the gross profit level and saw income from other sources like repairs, hiring and spare parts grow 44%. This restructuring of our revenue profile will reduce exposure to cyclical sales and improve our overall financial position.
On the future outlook Gautam comments that the transportation sector will see the impact of the EURO 4 standard implementation coming into play in July 2018. We commend the government in its efforts to go green however commercially, transportation business models run on very thin margins and are cost sensitive. Higher initial investment in purchase of the vehicles and use of cheaper fuels in vehicles will be replaced by super diesel as required by EURO 4 engines adversely impacting running costs and profitability of the sector.
Vehicle sales saw a marginal decline year on year to Rs 3 billion whilst revenue from other sources rose 44% to R 118.4 million against Rs 82 million for the same period last year. Prudent cost controls boosted the gross profit by 22% to Rs 308 million and saw the gross profit margin expand to 9.7% against 7.8% recorded a year ago.
Operating expenses for the quarter stood at Rs 138.9 million , a 172% increase over the first quarter of 2017 which was benefitted from a one off reversal. Net finance costs for the quarter rose 553% to Rs 67.2 million as we took on more debt to expand our stock of technologically superior BS3 compliant vehicles with latest safety standards. Inventory position grew 30% to Rs 5.7 billion cf. 4.4 billion in the first quarter of 2017 while interest bearing liabilities have risen 99% to Rs 4.1billion against Rs 2 billion a year ago.
The increase in finance resulted in a profit before tax of Rs 51.7mn versus Rs 135.5mn in 1Q 2017, signifying a 51% decline year on year.
Umesh Gautam, CEO of Lanka Ashok Leyland, relayed “that the first quarters’ sales performance has historically been sluggish over the last few years.
This quarter witnessed larger than normal exchange rate volatility which affected pricing and influenced our customers buying decisions. Despite these constraints, our vehicle sales continued to top the Rs 3 billion benchmark. Our bottom line does not fairly reflect the progress the company has made over the quarter which witnessed margin expansion at the gross profit level and saw income from other sources like repairs, hiring and spare parts grow 44%. This restructuring of our revenue profile will reduce exposure to cyclical sales and improve our overall financial position.
On the future outlook Gautam comments that the transportation sector will see the impact of the EURO 4 standard implementation coming into play in July 2018. We commend the government in its efforts to go green however commercially, transportation business models run on very thin margins and are cost sensitive. Higher initial investment in purchase of the vehicles and use of cheaper fuels in vehicles will be replaced by super diesel as required by EURO 4 engines adversely impacting running costs and profitability of the sector.
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