Escorts Ltd Shares Q3 Results

Like most of the companies in the tractors and agri machinery business, the top line and the bottom line of Escorts came under pressure in the Dec-21 quarter. On the rural demand front, there was pressure coming from an erratic monsoons. On the bottom line front, the sharp spike in input costs resulted in lower operating profits during the quarter.

Here is a Gist of the Quarterly Financial Numbers of Escorts Ltd

For the Dec-21 quarter, the total sales revenues of Escorts Ltd fell by -2.84% YoY to Rs.1,984 crore on a YoY consolidated basis. During the December 2021 quarter if you look at an analysis of the specific verticals, the agri machinery business saw lower revenues by -8.6% at Rs.1,527 crore YoY. The construction equipment business saw 12.9% growth in sales for the Dec-21 quarter to Rs.276 crore. On a sequential basis, the revenues were up by 18.55%.

The third major vertical of Escorts; the railway equipment business grew sharply by 48.7% in the quarter at Rs.174 crore and showed the best growth traction. Tractor volumes for the quarter stood at 25,325 units while construction equipment volumes stood at 1,151 units in the Dec-21 quarter. To a large extent, on the demand side, the rural cash flows were impacted by delayed harvest of Kharif crops and unseasonal late rains during the year.

Let us now turn to the operating performance of Escorts for the Dec-21 quarter. For the quarter, the operating profits were down -26.26% on a YoY consolidated basis at Rs.270.30 crore. During Dec-21 quarter, EBIT margins of agri machinery segment increased by 76 bps to 15.8%. However, due to steep inflation such margins were lower on sequential basis by 432 bps. This put pressure on the sequential performance in a bigger way.

The EBIT margins of the Escorts construction equipment business were lower by 114 bps at 2.5% on account of steep inflation impact in commodities. Even in the case of the railway products division, the EBIT margins were lower by 296 bps at 14.3%.  Overall, the OPM tapered due to higher inventory costs, from 17.95% in Dec-20 quarter to 13.62% in Dec-21 quarter. Operating margins were, however, higher sequentially by 16 basis points in Q3.

The net profits for the Dec-21 quarter were sharply down by -32.27% YoY at Rs.194.19 crore as the operating pressures got effectively transmitted to the bottom line. As a result, the net profit margins tapered very sharply by 425 basis points from 14.04% in the Dec-20 quarter to 9.79% in the Dec-21 quarter. The PAT margins were also lower on a sequential basis by 56 basis points.