India's Royal Enfield-maker Eicher Motors misses profit, margin estimates
India's Eicher Motors, which makes the Royal Enfield brand of motorcycles, reported third-quarter profit and margins below estimates on Monday, hurt by higher costs and as sales of lower-margin motorcycles outpaced those of higher-margin ones.
The company reported a net profit of 11.71 billion rupees (about $134 million) in the three months to December 31, versus analysts' expectation of 12.12 billion rupees, per data compiled by LSEG.
Rival Bajaj Auto had reported a smaller-than-expected third-quarter profit hurt by lower domestic sales, while Hero Motocorp topped profit expectations.
Eicher, which also makes trucks and buses in a joint venture with Sweden's Volvo Group, reported total revenue from operations of 49.73 billion rupees, missing estimates.
Margins were affected by a higher mix of less profitable vehicles and no price hikes during the quarter, finance chief Vidhya Srinivasan said on a conference call post earnings.
B. Govindarajan, CEO of Royal Enfield, said the company had undertaken "elevated marketing campaigns" for launches of some motorcycle models during the quarter and that spending was expected to continue.
The company's sales of motorcycles with engine capacity of up to 350cc, such as 'Meteor 350', climbed 15.5% in the quarter, compared with a 1.9% rise a year earlier. These lower-margin motorcycles formed a majority of sales for the company.
Meanwhile, higher-margin motorcycles accounted for nearly 12.8% of its third-quarter sales.
Eicher Motors' earnings before interest, taxes, depreciation and amortisation (EBITDA) margin fell to 24.2% from 26.1% a year ago, missing analysts' estimate of 26%.
Cost of materials consumed, which makes up more than half of the total expenses, grew 24.3%, pushing total expenses up by 22% to 39.65 billion rupees.
Separately, the company said Managing Director Siddhartha Lal would be appointed the executive chairman of the board as S. Sandilya retires.
B. Govindarajan will take over as managing director when Lal becomes chairman on February 13, it said.
($1 = 87.4380 Indian rupees)
