Lanka Ashok Leyland targets record sales in 2018 with strong 3Q2017 performance

Lanka Ashok Leyland carried its remarkable quarterly performance into the New Year with a remarkable third quarter performance. 

Revenue grew 52% for the first nine months of the year to Rs. 11.6 b against Rs. 7.6 b in 2016. While turnover is heavily reliant on vehicles sales, revenue from body manufacturing and spare parts have grown by 45% and 14% this year respectively. 

Gross profit stood at Rs. 851.9 m, a 23% increase YoY while the gross profit margin contracted to 7.3% owing to higher unit costs of the new range of BS3 compliant improved specification vehicles.

Prudent fiscal management and operational efficiency saw operating costs reduce 6% to Rs. 285.6 m against Rs. 302.2 m. Furthermore, net finance costs fell 87% to Rs. 8.9 m compared to Rs. 69 m for the same period last year. Inventory increased 59% to Rs. 6.2 b on account as the company builds up a stock of BS3 environmental standard compliant vehicles with upgraded technology.

The company posted a nine-month PBT of Rs. 500 m, a 97% increase year on year.

Lanka Ashok Leyland CEO Umesh Gautam said: “This sustained performance by the company is attributable to the brand acceptance we have and the trust we have earned in the market. Last year, management made a commitment to introduce environmentally friendly BS3 vehicles with improved safety features and driving comfort, which has been received well in the market. BS is a recognized norm for engine emissions mirroring the Euro engine norms strictly followed in Europe. 

“The substantial rise in our inventory is in lieu of the BS3 range of vehicles imported to bring confidence to the market to phase out existing fleets. We are absorbing the higher import cost per unit of these vehicles to reduce the burden on our customers and incentivise customers to switchover to environmentally-friendlier vehicles. We are targeting to surpass Rs. 15 b turnover by year end.

“Complementary to our vehicle sales, revenue from spare parts and bodybuilding have also done well and we hope to unlock more value in those verticals to broad base our revenue distribution going forward. Furthermore, the company has taken a landmark decision to undertake a large-scale CSR project moving away from the type of activities we’ve been involved with up till now. We feel that the time is right to give back to our communities in a way that reflects the sort of ambition we have shown in our business operations.”