India’s second largest two-wheeler manufacturer Bajaj Auto posted a decline of 23 per cent in its third quarter net profit owing to falling demand for its products. The profit for the quarter ended December 31, 2008, stood at Rs 164 crore compared with Rs 213 crore in the year-ago period.
Net sales during the period stood at Rs 2,004 crore, a drop of 16 per cent as against Rs 2,398 crore y-o-y. The drop in absolute sales volume however, was much higher at 31 per cent, selling only 493,748 units compared to 713,135 units.
In an effort to correct inventory levels, Bajaj Auto was forced to shut down its manufacturing plant for 10 days (of which five days were in December and the rest in January), which led to working capital savings.
“An extremely lean cost structure was achieved as plants were closed, two-thirds of the employees retired and about 855 suppliers rationalised down to 200 over the last decade,” the company stated in a release.
The company was largely helped by revenues flowing in from the export segment. Higher realisations in exports materialised due to the depreciating value of the rupee during the quarter. Export sales contributed to 44 per cent of the company’s total volumes during the quarter. The company further added that its non-100cc segment contributed to 63 per cent of the total sales. The company sells eight models in the profitable executive and premium segment (more than 125cc) where it has more than 55 per cent market share.
Mahantesh Sabarad, analyst, Centrum Broking, said, “Bajaj’s result has been higher than expected during the quarter. The company had paid compensation under the voluntary retirement scheme (VRS) that impacted its net profit, which otherwise would have stood at Rs 211 crore after factoring in the tax.”
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It paid Rs 61 crore under the VRS scheme during the quarter. In addition, higher concentration of production from its excise-free Pantnagar plant lead to a cut of 55 per cent in excise duty payout.
S Sridhar, CEO, two-wheelers, Bajaj Auto, said, “There will not be any great performance from the motorcycle segment in 2009 with the first six months expected to be subdued.”