Escorts Profits Surge To Rs 11.87 Crore In Fy 08
Higher market share, improved earnings, structural reorganisation, cost efficiencies drive Escorts back into profits
Economic management strategies deliver healthy profits in a high inflation, constrained demand scenario
Domestic sales ramps up through aggressive, revamped retail push
Fiscal FY08 EBITDA up 40 per cent
Cash profit doubles to Rs 96.55 crore
PBT up at Rs 45.54 crore after loss previous year
Strong rural demand hobbled by slowdown in agri finance disbursal
Escorts Limited profits rose to Rs 11.87 crore in financial year 2007-08 ending 30th September 2008 on the back of a slew of strategies that has delivered higher domestic market share, improved earnings from a lower market base, structural reorganisation and greater cost and operational efficiencies. This is against a loss in the previous fiscal of Rs 6.44 crore.
The company recorded a higher EBIDTA of Rs 152.48 crore as against an EBITDA of Rs 109.50 crore in the previous fiscal. Cash profit more than doubled in fiscal 2007-08 at Rs 96.55 crore as against Rs 40.55 crore in the corresponding period. Profit before Tax and exceptional items stood at Rs 45.54 crore as against a loss of Rs 10.75 crore in the previous fiscal.
Escorts domestic sales grew faster than the market during the fiscal, aided by the strengthening of its sales and marketing network. The rise in profits was substantially aided by improvement in cost management and rationalization. Escorts Limited follows an October-September fiscal year.
The Railway Equipment Division also witnessed significant growth in the air brake, brake blocks, shock absorbers, couplers etc. As a result, RED business has grown by 24% over the previous fiscal, while exports grew by 100%.
Despite industry slowdown in tractor sales, Escorts Limited maintained its overall sales performance. There was a marginal dip in total sales revenue due to sharp decline in exports which were impacted by the sharp rupee appreciation. However, domestic sales demonstrated strong growth. Total sales for the fiscal stood at Rs 2051.51 crore as against Rs 2,102.15 crore in the previous fiscal. Escorts also captured incremental growth beyond the industrial volume of the market by adding niche products to the portfolio. These included Lighter axle rice plantation tractor for South India and Heavy duty large four wheel drive tractors.
Speaking on the results, Chairman and Managing Director Mr Rajan Nanda said, "Escorts Limited has proven through its performance in fiscal 2007-08 that the efforts to strengthen the fundamentals of the company, sharpen focus on core strengths, build value for customers and drive operational efficiencies have put the company on a profitable track. At a time when industry and business the world over is challenged by tough economic conditions, Escorts has demonstrated even in tough times that relentless focus on fundamentals of cost, product quality, operational efficiencies and a culture shift in driving business value can deliver profits, customer and shareholder value."
"Today, the strong rural demand is becoming hobbled by the slowdown in disbursal of farm-directed finance. The big challenge for the year ahead will be to deal with the slowdown in bank credit which has created an artificial squeeze of demand in the agri machinery sector. The negative mode in which public sector banks are disbursing loans in the rural areas have resulted in only a third of the priority sector loan targets being met. It is hoped that the government will work expeditiously to ensure that the targets for priority sector lending are met in the remaining months of the current Union fiscal year," Mr Nanda said.
According to Mr Nanda, "The agri machinery business registered strong growth in profitability. Right through the year, despite difficult market conditions, Escorts increased its market share. In the current economic situation, the agriculture sector with its relative insularity from the buffets of global financial collapse can provide India the necessary growth engine. It is for the government to ensure that retail finance in the rural areas meets the goals that the government itself is committed to."
According to Joint Managing Director Mr Nikhil Nanda, "From a cost point of view, this was one of the toughest years given the huge spike in petroleum prices and the consequent impact on raw material prices. The full year results demonstrate that cost reduction, operational efficiencies, raw material rationalization and energy saving have resulted in a strong, profitable performance. Despite very high inflationary pressures for almost the entire year, the battle for controlling costs won the day. Most important, Escorts today has a team that has performed exceedingly well in tough market conditions."