 "Good operational performance by Amara Raja")
While operating profit at Rs 142 crore was up 20 per cent, net profit was up 35 per cent on a year on year basis. While the operating profit and the net profit were above estimates to the tune of 12 per cent and 14 per cent respectively, revenues at Rs 807 crore, up 12 per cent. were in line with analyst estimates.
The results of the country's second largest organised battery maker according to analysts were better than market leader Exide which saw a revenue fall of 6 per cent year on year for the quarter. In fact Exide's revenues were its lowest in six quarters.
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Weak demand in original equipment manufacturer (OEM) and inverter segments were responsible for Exide's performance. Its Ebidta margins too were down 220 bps to 14.1 per cent. Exide however indicated that the performance was due to rupee depreciation of 12 per cent and its price increases was not enough to cover the cost of rising lead prices and the higher import costs give rupee depreciation. The company is confident of regaining the 16 per cent margins achieved in the June quarter on the back of volume growth as well as increase in prices. The company continues to maintain a market share of 66 per cent in the OEM auto segment while Amara Raja has a market share of 28 per cent.
Operating profit margins for its competitor Amara Raja on the other hand came in a strong 17.6 per cent up 124 bps over the year ago quarter. A sharp fall in purchase of traded goods down 54 per cent year on year to Rs 24 crore helped boost margins. Yaresh Kothari of Angel Broking believes that a decline in trading revenues of the UPS segment was responsible for this fall. In addition to this higher share of revenues from the more profitable auto replacement segment (the other being OEM segment) also aided in the improvement in margins.
Lead costs which accounts for a major chunk of its expenses were higher than the year ago quarter. As a per cent of sales, raw materials were at 63 per cent up 500 basis points over the year ago period. However, the company has been taking price hikes continuously in the replacement segment to offset the raw material cost increase. The company has already taken three price hikes this year, the last one in this month. Strong volumes expansion in the four and two wheeler replacement battery segment as well as price hikes helped aid expansion of gross margins. Despite the capacity constraints and subdued demand in inverter segment, the company's industrial segment too recorded a double digit growth.
It is the operating performance that helped the company improve its net profits which grew 35 per cent to Rs 94.5 crore. While interest costs were marginal given negligible gross debt, taxes jumped 24 per cent. Tax rate however came down 200 bps to 29 per cent.