Bajaj Auto net profit rises 4.7%

Bajaj Auto reported better than expected earnings in the December quarter, thanks to higher other income, lower tax rates and raw material costs. The company’s net sales declined 1.5 per cent to Rs 5,565 crore compared to last year, as volumes declined three per cent during the quarter.

Sequentially, too, net sales fell 8.7 per cent. The fall in volumes was driven by a sharp 16 per cent year-on-year (y-o-y) decline in exports. Domestic sales grew at a robust by 10 per cent during the quarter, driven by new product launches. The company said its strategy to expand the price segment and to reinforce its leadership in the premium and luxury segments has paid rich dividends. The newly-launched Avenger clocked volumes of 20,000 in December.

The sharp fall in oil prices has hit demand in some of oil producing countries like Nigeria and Egypt, which has hurt the company.

Despite the decline in sales, profitability has not been impacted in the December quarter. The company’s operating income declined 4.5 per cent y-o-y to Rs 1,170 crore, while net profit increased 4.7 per cent to Rs 900 crore. Its profit after tax was better than estimated by analysts. Net profit increase was driven by lower tax rate and raw material costs and higher other income. Its other income doubled to Rs 200 crore. The operating margin, however, fell 70 basis points y-o-y to 21 per cent during the quarter.

During the quarter, raw material costs declined 4.3 per cent y-o-y to Rs 3,695 crore. Effective tax rate also declined to 30.5 per cent from 31.4 per cent last year. Other Expenses increased 32 per cent y-o-y to Rs 467 crore accounting for 8.4 per cent of sales. Even though the domestic business has fared well, earnings forecasts may be revised downwards on export issues.