Escorts Kubota (ESCORTS) Q4 98/99 earnings summary

Executive summary

• FY1998-99 income fell 7% to Rs.1,319.70 crore; net profit declined to Rs.84.17 crore from Rs.129.84 crore, reflecting the economic slowdown and a 70-day labor disruption.

• A new long-term labor agreement and manufacturing re-engineering reset productivity norms and work practices; higher output in early FY2000 supported a stronger tractor market position.

• Strategic investments, technology alliances and restructuring were positioned to support growth, while management planned to repay term debt over three years without new borrowings.

Financial highlights

• Sales and other income were Rs.1,319.70 crore vs. Rs.1,417.76 crore; PBT was Rs.110.17 crore vs. Rs.163.44 crore, and PAT was Rs.84.17 crore vs. Rs.129.84 crore.

• Profit before interest and depreciation was Rs.199.56 crore vs. Rs.238.61 crore; interest expense rose to Rs.58.10 crore from Rs.44.04 crore.

• Extraordinary income was Rs.52.06 crore, including a Rs.48.61 crore surplus on investment sales; reported PAT includes these items.

• Net worth rose to Rs.929.71 crore from Rs.879.01 crore; dividend recommended was Rs.4.50 per share, with Rs.35.40 crore total outflow including dividend tax.

Outlook and guidance

• Tractor business forecast to grow 24% in FY2000, with expected sales of 56,000 units; April-May market share reached 20.5% vs. 15.1% a year earlier and 17.9% for FY1999.

• Management targeted repayment of Rs.513 crore in term debt within three years without borrowing and planned additional agri R&D and infrastructure investment.

• Cellular operations were expected to reach cost break-even during FY2000; cash profits were targeted by FY2001, conditional on favorable telecom policy changes.

• Construction equipment demand was expected to grow normally; upgraded backhoe loaders and a new pick-and-carry crane were planned for launch in FY2000.