Segment profits dipped by 45 percent in the September quarter compared to a year ago
Rupee depreciation coupled with a rise in input prices impacted the profitability of the cooling products segment of Voltas in the second quarter. The segmental profit saw a drop of 45.3 percent year-on-year (YoY) in the September quarter to Rs 27.75 crore.
The segment includes both residential and commercial products.
Voltas is the market leader in the segment.
The revenue for the cooling segment rose by 8.2 percent YoY to Rs 441.01 crore in the September quarter.
The company's net profit for Q2 was up 12.2 percent YoY at Rs 107 crore.
In terms of the revenue share, electro-mechanical projects and services segment revenue rose by 61.8 percent to Rs 901.48 crore for Q2FY19. The segmental profit rose by 150.5 percent YoY to Rs 75.92 crore during the September quarter.
In a press statement, Voltas said these reflect better quality of orders, efficient execution both in domestic and international business with a positive impact of foreign exchange.
The company said it continues to hold the number one position in the room air-conditioner market and has further improved its market share to 25.6 percent in the current quarter as compared to 23.2 percent on a YoY basis (in multi-brand outlets).
For the engineering products and services segment, Q2 revenue was up 9.4 percent YoY to Rs 72.86 crore. This segment reported a 5.4 percent YoY rise in profit to Rs 28.99 crore.
AC sales face multiple challenges
Air-conditioner (AC) sales in the country have been impacted by not just rupee depreciation, but also fuel price hike. Rupee depreciation has led to an almost 10 percent increase in manufacturing costs. Added to this was the customs duty hike from 10 percent to 20 percent. Further, unseasonal rains also led to cooler temperatures in several parts of India leading to a hit on the sale of cooling products.
High rates of taxation have also played a dampener. While several appliance makers had demanded a reduction in GST rates for ACs to 18 percent, the rates continue to stay at 28 percent. The rationale given by the council was that ACs are still a luxury product and not a mass-market appliance.
