Mumbai: Even as Ashok Leyland clocked a Rs 3,074 crore turnover last fiscal (crossing the Rs 3,000 crore mark), posted an increased net profit of Rs 120 crore and has proposed a 50 per cent dividend, the enthusiasm is punctured in part by its fourth quarter results and a decrease in defence sales.

For the quarter ending 31 March 2003, the company saw its net profit decline by 3.29 crore to Rs 66.34 compared to the fourth quarter figures of 2001-02.

Attributing that to an increase in input prices (mainly steel), Ashok Leyland managing director R Seshasayee says: "The prices have been going up during the past few months. We are focused on managing costs."

In addition, the full impact of the wage revision made during 2001-02 was felt last fiscal. Similarly this year the executives have given themselves a hike that Seshasayee says is comparable to the industry standards. Also, the proposed launch of 27 models this year would see an increase in promotional and related costs.

Seshasayee says the impact is mitigated through process improvement, downsizing the manpower, enhancing the asset productivity and proper funds management. The other worrying aspect is the company's defence sales. Last year Ashok Leyland sold 320 units as against 668 units made in 2001-02.

Giving an overview of the fiscal 2002-03 Seshasayee says the company sold 36,444 units last year as compared to 29,673 units during 2001-02. "In the 1.16-lakh medium-duty vehicle market, Ashok Leyland's share was 33, 581 units last year."

Exports went up by 380 units to 2,770 units. "Despite the tough market conditions our engines sales went up by 666 units to 5,924 units," he says.

The company underwent a major restructuring exercise by exiting the Iveco engine platform in favour of Hino engines. The company had recently signed an agreement with Hino Motors, Japan, to manufacture high-powered Hino engines (J series) in India (See Hino Motors Japan to source auto components from India).

On the finance side Ashok Leyland last year prepaid high cost debts to the tune of Rs 155 crore and brought down the finance expenses by 29.1 per cent to Rs 58 crore.

Says Seshasayee: "There were already early trends of more balanced countrywide growth in demand for commercial vehicles. The phased all-India launch of trucks with H series engine is complete and the market has responded positively. We have increased the H-series engine capacity to 50,000 units to support its induction into most of the new models hitting the market in the current year."

On the exports side Ashok Leyland has secured an order for 3,322 trucks valued at $4.6 crore for Iraq under the UN-approved Oil for Food programme. However, the question mark hangs over its realisation as this depends on the priority given by the US-UK combine to such purchase. The company has also got repeat orders from Seychelles and Afghanistan.