Despite slowdown in CV biz, Eicher profits up 2.3% in Q3 FY2019

For the quarter ended December 31, 2018, Eicher Motors recorded total revenue from operations at Rs. 2,341 crores, EBITDA at Rs. 680 crores and net profit after tax at Rs.533 crores. Increased insurance requirements, rising raw material costs and the subsequent price increase due to regulatory safety requirements blamed for low profits from the two-wheeler segment. In the CV industry, sales were affected especially in the heavy-duty segment due to change in axle load norms and liquidity crunch.

Royal Enfield’s total revenue from operations rose 3 percent to Rs. 2,341 crore, compared to Rs. 2,269 crores in the same period last year; EBITDA was Rs. 680 crores, down by 4 percent compared to Rs 707 crores in the same period last year; Profit After Tax (PAT) grew by 2 percent to Rs. 533 crores from Rs. 521 crores in the same period last year.

Royal Enfield sold 193,871 motorcycles in the quarter, registering a decline of 6 percent from 202,736 motorcycles sold in the same period last year.

Commenting on Royal Enfield’s performance, Siddhartha Lal, managing director and CEO Eicher Motors, said, “The latter half of 2018 was a challenging period for the two-wheeler industry in India. Factors like increased insurance requirements, rising raw material costs and the subsequent price increase due to regulatory safety requirements impacted the momentum of the industry. Royal Enfield’s market share recorded improvement on a sequential basis, while volumes in the quarter were impacted. We believe this is a temporary impact due to a price reset. We continue to remain optimistic about the trend of premiumisation in the motorcycling industry, and are confident that this trend will continue in the future.”

Royal Enfield launched the 650 Twin motorcycles in the third quarter - the Interceptor 650 and the Continental GT 650 - in India and other key markets across the globe. During the quarter, the 650 Twins were also launched in the UK and Europe at the EICMA Motorcycle Show in Milan, Italy and also in Thailand, Indonesia, Brazil, Colombia and Australia. While retail sales have already begun in India, deliveries in the global markets are expected to begin soon. “The initial enthusiasm from markets has been very encouraging, and we strongly believe that these modern classics will be an attractive and evocative option for motorcycle lovers everywhere” added Siddhartha.

In the Commercial Vehicles (CV) segment, VE Commercial Vehicles (VECV) - Eicher’s joint-venture with AB Volvo - was said to be affected by the industry slowdown especially in Heavy Duty (HD) segment. VECV’s revenue from operations rose by 9 percent to Rs. 2,818 crores from Rs. 2,590 crores in the same period last year; EBITDA declined by 18 percent to Rs. 186 crores from Rs. 226 crores in the same period last year; Profit After Tax declined by 43 percent to Rs. 76 crores from Rs. 133 crores last year.

VECV sold 16,936 trucks and buses in the quarter, growing 4 percent over the same period last year. VECV’s performance in the LMD segment saw a 9 percent growth on a year-on-year basis. In the HD segment, the VECV recorded a growth of 4 percent while the industry declined by 13 percent year-on-year. During the quarter, certain non-banking financial companies (NBFCs) scaled back their lending activities affecting sales. The trend of heavy discounting continues in the CV industry despite the sustained demand.

Speaking on VECV’s performance Siddhartha said, “While the demand momentum continues in the CV industry, sales were affected especially in HD segment due to change in axle load norms and liquidity crunch. However, in Q3 2019, VECV increased its market share in HD Trucks through focused market penetration and strengthening the product portfolio with new launches of our modernised ‘Value Trucks’ over the past year. We continue to believe that we can be the catalyst that drives modernisation of commercial transportation in India and other developing markets.”