LAL posts Rs. 111.4m PBT

Improving on its first quarter results of 2013, Lanka Ashok Leyland (LAL) recorded a six-month profit before tax of Rs 111.4 million, down 76% from the Rs 468.8 million recorded during the corresponding period in 2012.

Revenue fell 47% in the first six months to Rs 3.7 billion from Rs 7 billion in the corresponding period of 2012 driven mainly by a decrease in heavy vehicle sales which fell 57%.

The firm's other revenue streams, constituting a minor proportion to total revenue, grew 17% owing to increases in spare part sales and accident repair income of 43% and 40% while generator sales fell 36% over the first six months of 2012.

Lanka Ashok Leyland further increased its gross profit margin which rose to 11.5% in 2013 over the 7.5% achieved in 2012 as the company continues to reduce its inventory while its new product offering in the light commercial vehicle segment, the Dost, had an impressive sales period, said CEO, Lanka Ashok Leyland PLC, Umesh Gautam.Other income which constitutes lease income and VAT accumulation reversals as its main drivers fell 54% year-on-year. Two thousand and twelve saw a large VAT reversal as a unique line item due to which VAT reversal fell 73% in 2013. Lower interest rates and a reducing lease asset balance saw lease income fall 32% to Rs 47.1 million.

Operational costs declined, as the company monitors and maintains a lean cost structure in a difficult market environment. Operating margins increased slightly to 9% in 2013 from 8% in 2012.

A poor market environment and a large inventory continue to result in a costly interest expense for the company adversely affecting its bottom line. Interest expense grew a staggering 207% to Rs 222 million for the six months ending September 30, 2013 against Rs 71.9 million in the corresponding period last year.

Contributions to the government fell to Rs 27.6 million resulting in a final profit after tax of Rs 82.7 million for the six-month period, a 78% decline year-on-year. Driven by the large interest expense, net profit margins fell to 2% as opposed to 5% a year earlier.

Total assets fell 26% to Rs 5.3 billion from Rs 7.1 billion in 2012 driven mainly by a 34% reduction in total inventories which fell from Rs 5.1 billion in 2012 to Rs 3.3 billion in 2013. Total liabilities fell 38% driven primarily by overall borrowings falling 40% to Rs 2.5 billion from Rs 4.1 billion in 2012.