The fourth quarter results for the last fiscal have been a mixed bag for Eicher Motors Limited (EML). On the one hand, its niche bike maker Royal Enfield posted its best-ever performance in the quarter as the sales increased by 27 per cent to 226,907 motorcycles over the corresponding quarter last year. Its revenue was also highest ever at Rs 2,528 crores for Q4 FY18, a growth of 34 per cent over Q4 FY17.
But on the other hand, hit by the March 2018 closure of Eicher Polaris Pvt Ltd (EEPL) - its 50:50 joint venture with US-based Polaris Inc - EML's consolidated net profit for the quarter under review was rather muted at Rs 462 crore. "Our net profit for the fourth quarter grew by just Rs 3 crore [year-on-year] as a result of one time impairment we had to take due to the closure of EEPL," Eicher Motors MD and CEO Siddhartha Lal said in a conference call. The "one-time" hit in question was a pretty substantial Rs 187 crore.
EML's profit after tax from continuing operations (PAT) stood at Rs 649 crore for the fourth quarter, up 38 per cent year-on-year. Meanwhile, revenue from operations stood at Rs 2,528 crore for the fourth quarter as against Rs 1,888 crore for the same period of the previous fiscal.
For the year ended March 31, the company posted a net profit of Rs 1,960 crore, up 15 per cent from Rs 1,667 crore during the 2016-17 fiscal and its revenue from operation went up 22 per cent to Rs 8,965 crore in the same period.
EML has earmarked a capex of Rs 800 crore for the current financial year, to be invested in all areas of its business including second phase of the company's third plant at Vallam Vadagal near Chennai. In addition, Lal added that the company would be investing in the construction of a technology centre in Chennai this year, new product development to meet upcoming regulations and to expand Royal Enfield's portfolio for its global markets. The planned capacity for 2018-19 is 9.5 lakh units.
Speaking on the sidelines of announcing the fourth quarter results Lal said, "We are extremely bullish on Thailand and Indonesia. We have seen very good traction for Royal Enfield bikes in these markets. We will have market companies with our own employees working there, where distribution will be done by us but dealers will be local. The idea is that it should be followed by local assembly but we are looking at different options." According to Moneycontrol, having an assembly plant in South East Asia will help the company bag a bigger share of the global two million mid-segment bike market.
However, rather than investing in business assets such as a manufacturing plant there, EML's preference would be "contract manufacturing" since assembly works out better from the taxation point of view compared to exporting fully-built units. "If it works, we could have something in Vietnam too," added Lal.
Commenting on performance of VE Commercial Vehicles (VECV), Lal said the company posted a net profit of Rs 177 crore for the fourth quarter, as compared with Rs 117 crore in the same period of previous fiscal. The company, which is a 50:50 joint venture between Eicher and Volvo, posted revenue from operations at Rs 3,317 crore as against Rs 2,554 crore in Q4 FY17.
"Towards driving modernisation in the CV industry, VECV will be investing Rs 500 crore in 2018-19 in all areas of its business. With the upswing in the CV industry our latest range of modern Pro-Series trucks will be able to grow its market share further in the coming months," said Lal.
EML's board also recommended a dividend of Rs 110 per equity share of face value of Rs 10 each for the financial year ended March 31, 2018. That's a dividend of 1,100 per cent.
With PTI inputs