Escorts’ Topline Shrinks By 2.92% In March Quarter

Escorts announced its results for the quarter ending March 2013 on May 09, 2013. Its numbers have been rather dismal and the company is facing an evident slowdown.

In the quarter ending March 2013 (referred to as Q2FY13 by Escorts), tractor volumes came in negative for Escorts. Total tractor sales in quarter stood at 14764 units as against 15034 units in Q2FY12, showing a decline of 1.80%. Domestic sales volumes, which contribute to more than 95% of total sales, were up by 1.48% as compared to Q2FY12. However the company has taken a massive hit on exports, which have reduced by 85.36% YoY. This resulted in an overall decline in sales volumes.

In line with this, revenues of Escorts declined by 2.92% in Q2FY13 to Rs 1000.64 crore. However, there was a YoY increase of 6.08% in EBITDA and 61.58% in the net profit. Although that seems positive in a big way, it’s not when you look deeper. The net profit was boosted by a tax income of Rs 6.23 crore that the company has reported as against a tax expense of Rs 5.59 crore in Q2FY12.

Yes, the margins do look improved. However, there is decline in sales volumes and revenues. The heaviest hit is the construction equipments segment which had revenues decline by 31.91%, on a yearly basis. In terms of profitability, the auto ancillary segment took a hit, with profits reducing by 24.04% in Q2FY13. Profitability in the construction equipments segment declined drastically as the segment made a loss of Rs 0.78 crore in Q2FY13 as compared to a profit of Rs 8.42 crore in Q2FY12.

Overall, the results of Escorts have been dismal. The performance of the company has been subdued because of low tractor sales and on account of reduced construction activity. The outlook remains negative at the moment. However, a good monsoon combined with a pick-up in construction activity can help the company.