Until now, battery manufacturers coped well with the slowdown in auto sales. But the ride ahead looks tough.
Fortunately, replacement market sales of automotive batteries, good offtake in UPS (uninterrupted power supply) systems and home inverters have charged revenues of both Exide Industries Ltd and Amara Raja Batteries Ltd. This compensated for the double-digit drop in original-equipment (OE) demand, leading to flat revenue that was in-line with estimates.
Profit growth, though, came from lower raw material costs. Lead prices fell by about 20% year-on-year. Hence, in spite of low operating leverage, the Ebitda (earnings before interest, tax, depreciation and amortization) margins of both manufacturers expanded.
