Bajaj Auto has seen a modest growth in sales, but recorded a fall in profits for the second quarter in a row. That puts the sales growth for the half-year ended September 2008 at 9 per cent. A large part of this growth has come from the increase in demand for and improved realisations from the sale of high-end bikes.
For the April-September 2008 period, volumes in the 125-250cc segment have grown by about 13 per cent, while the entry segment witnessed an 18 per cent drop in volumes. This is in line with the shift in customer preferences to the executive and premium segment bikes witnessed in the last one year.
Besides, the company�s focus on exports, given the slowdown in the domestic markets, has also aided growth. Two-wheeler exports grew by 41 per cent during the same period.
Profits drop
Spiralling input costs had pushed down the operating margins to 11.5 per cent in the first quarter. But thanks to price hikes, softening commodity prices and improved realisations from a better product mix, operating margins in the second quarter have expanded to about 13.5 per cent.
But this benefit has failed to reflect in the profits, due to the recognition of VRS expenses for the workers of the Akurdi plant to the extent of Rs 61 crore during the second quarter.
For the first half, the company�s profits have fallen by about 17 per cent on a year-on-year basis (fall of 4 per cent in Q1 and 28 per cent in Q2)
Prospects
Going forward, the company will benefit from the growing demand for bikes in the 125cc segment. It is slated to launch two more bikes in this category in the current year.
Operating margins may also witness improvement in the next few quarters due to fall in commodity prices and improved realisations. But the deferred recognition of VRS expenses may be a dampener on profits.
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