Escorts Kubota (ESCORTS) Q4 97/98 earnings summary

Executive summary

• FY98 delivered 11% tractor volume growth and a slight increase in after-tax profit despite lower other income and a difficult economic environment.

• Business restructuring continued, with investment in core capacity, technology partnerships and overseas ventures; a 50% equity capital reduction and preference-share issue were proposed.

Financial highlights

• Total income was Rs.1,414.14 crore vs Rs.1,657.49 crore; the prior year included Rs.397.85 crore from divested activities. Comparable turnover grew 15.7% to Rs.1,275.58 crore from Rs.1,102.35 crore.

• PBT was Rs.163.44 crore vs Rs.167.22 crore; PAT rose to Rs.129.84 crore from Rs.127.22 crore.

• Net worth increased to Rs.879.01 crore from Rs.796.68 crore; recommended dividend remained Rs.4.50/share, or 45% of face value.

• Other income declined to Rs.139 crore from Rs.157 crore; profit as a percentage of sales improved to 10% from 8.5%.

Outlook and guidance

• New Ranjangaon tractor plant planned at Rs.200 crore, adding 18,000 units/year; first tractor was expected in 1999, with initial-phase capacity of 12,000 units/year.

• Total tractor capacity was targeted to reach 80,000 units/year; management expected to sustain growth through new models and capacity expansion.

• Cellular services planned further subscriber and network growth in 1998-99; construction equipment cost-reduction programs targeted improved future profitability.