A slowdown in tractor sales has led to a 75 per cent drop in Escorts' standalone net profit for the quarter ended March 31, 2012.
Net sales for the company fell 11 per cent in the period. Escorts follows an October-September fiscal year.
Production cut
To align itself to the lower demand, the company cut back production, while reducing inventory levels by Rs 100 crore over the last two months at both the factory and the dealer-end.
“The industry is going through rough weather, with the minimum support prices under pressure and untimely rainfall destroying some crops in North India. Since November last year, we have increased prices four times already,” Mr Nikhil Nanda, Joint Managing Director, told
The company also expects costs to further reduce by next year, after it received approval to merge three group entities — Escorts Construction Equipment, Escotrac Finance and Investments and Escorts Finance Investment and Leasing, into itself at a court-convened meeting on April 20.
The merger is expected to add Rs 1,000 crore into the Escorts' topline, leading to cost-savings on a combined backend infrastructure and sourcing. “We're creating treasury stocks as a war chest for expansion purposes. We believe we're under valued right now,” he said.
While there will be no spends on fresh capacity after the Rs 150-crore investment of last fiscal, up to Rs 70 crore will be spent on new technology, upgrades and products over the next two years. For this, it has entered into design agreements with European technical experts.
“We're looking to manage cash as much as possible. We have a very large product programme over the next few quarters. We are concentrating more on the higher end of the tractor range, as we feel that is the future,” Mr Nanda said.
‘executive' series
With the recent launch of a more profitable ‘executive' series, Escorts tractor range now extends from 12 to 110 HP. A wide portfolio has encouraged the company to look for increased export orders from Africa and Europe.
On the BSE, Escorts shares were up 1.13 per cent to Rs 67.4 on Friday.