UPDATE 2-Ashok Leyland Q1 profit beats forecast


(Updates adding company chief quotes, more details)

By Suresh Seshadri

MADRAS, India, July 26 (Reuters) - India's second-largest truck maker, Ashok Leyland Ltd, posted a better-than-expected first-quarter net profit on Friday, versus a loss a year earlier, helped by higher sales and a tight control on costs.

The Madras-based company, which also makes buses, is the Indian flagship of the U.K.-based billionaire Hinduja brothers.

Its April-June net profit, after an extraordinary charge for amortising voluntary retirement expenses, was 97.47 million rupees ($1.94 million), or 0.82 rupees a share, versus a loss of 94.04 million rupees a year earlier.

Net profit beat the median estimate of 67 million rupees in a Reuters survey of five analysts.

Sales, including excise duty, rose 11.4 percent to 6.5 billion rupees. The median of analysts' estimates for sales, excluding excise, was 6.11 billion rupees.

"Results are in line with expectations, with profitability clearly showing healthy growth," said S Krishnakumar, vice president at Anush Shares and Securities.

But after the results, the company's shares ended down 5.6 percent at 95.95 rupees on the Bombay Stock Exchange, whose benchmark index shed 2.28 percent.

Pramod Amthe, an auto analyst at Cholamandalam Securities, said they fell partly due to bearishness about auto stocks as India faces the worst drought in more than a decade, with the monsoon yielding below-average rainfall in many parts so far.

Shares of the largest truckmaker, Tata Engineering and Locomotive Co ended down seven percent at 132 rupees.


But Ashok Leyland's managing director, R Seshasayee, said the firm would not feel the pinch of a failed monsoon since farm produce no longer constituted the bulk of goods moved by road.

"Demand in recent months has been driven much more by the movement of cement and steel and government spending on the infrastructure sector," he told reporters after a shareholders' meeting earlier in the day. "Also, since our main markets are in the south and west we think we will be far less affected."

Seshasayee also said that rising costs of inputs such as steel could force the company to raise prices later in the year.

Domestic steel prices have risen by 3,000-4,000 rupees per tonne since April.

"We are beginning to feel the heat from increases in the prices of commodities such as steel," Seshasayee said.

"While the long-term contracts we have with some of our suppliers are easing the pressure for now, we may come under significant strain if prices keep going up. We may then need to increase our prices later in the year." (US$1 = 48.68 rupees)



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