Festival season, monsoon to boost Q3 earnings nos: Escorts

A modest improvement in tractor sales, better product mix and lower raw material costs boosted June quarter bottomline, Bharat Madan, Group Financial Controller at Escorts told CNBC-TV18.Escorts’ quarterly net profit grew 6.33 percent to Rs 36.27 crore, but net sales declined to Rs 973.22 crore against Rs 1,122 crore year-on-year. The equipment and mining businesses took a beating in the quarter gone by. Madan said the company is awaiting some big orders from the government for a revival in the equipment business. He expects the second quarter to be flat. For the year, Madan expects the agriculture business to do well with adequate monsoon and better Kharif crops. Festivties in October, November will be reflected in third quarter earnings, he said.
The company is aiming for a 15-20 percent growth in FY16, he said.

Below is the transcript of Bharat Madan's interview with Latha Venkatesh and Ekta Batra on CNBC-TV18. Latha: These days revenues have been tepid for everybody. In your case the sales are better than the previous quarter but from the year ago quarter they look a little lower, you did Rs 1,100 crore in terms of sales in the FY15Q1, FY16 is Rs 978 crore but profits have done better. Can you give us an idea of volume, everything taken together, agriculture machinery construction all your equipment taken together, are volumes better than previous quarter or year ago quarter? A: If you look at the numbers, the volumes have been better sequentially compared to the March quarter because March typically was a low quarter with industry de-grown significantly almost 30 percent on tractors. Tractor, in our case, is almost 80-85 percent of the topline. But compared to the last year, industry continues to degrow. This quarter, we saw 16.8 percent degrowth happening in the industry. So compared to the last two quarters, it was more than 13 percent. This time it is around 16-17 percent. Latha: What about your sales that is the industry number you are giving me? A: Yes, this is the industry -- so we have also gone in-line with the industry. Our degrowth has also been about 15.8 percent. There is slight improvement in the market share at this point of 1 percent. We will be following the industry. Latha: Should we expect that the current quarter is different -- after all we are half way through? A: Current quarter also we are looking at weak sign and we have seen July the way it has gone so again industry went down by 17-18 percent. So again this quarter we will see a degrowth that this time activity which normally used to start from September has also shifted to October-November now so most of the demand will see a shift going to Q3. We expect Q3 to be a bumper quarter for our industry. Also with kharif output, our harvesting should be very good. So, I think the season sentiment for Q3 are very positive as of now. Ekta: What is happening with your construction equipment business? A: The equipment business hasn’t been taking off, so I think we are looking at some big bang announcement project to get rolled out from the government side then only we will see some traction happening. Some movement has started happening in the mining sector, but we are not very strong on the mining sector, road we are seeing some movement happening but as of now it is very low. Ekta: So you are expecting FY16 to be flattish for construction equipment and maybe some incremental pick up in the next couple of quarters for agri-machinery? A: Yes. Q3 onwards, we expect the agriculture to start doing well and construction, this year, would be more or less a flattish year.