Key takeaways of the conference call
Sales for the quarter was lower by 23% to 262.26 crore and the net profit was lower by 53% to Rs 14.37 crore.
While the core engines business revenue for the quarter was lower by 5% (to Rs 223.78 crore) its PBIT was lower by just 2% (to Rs 30.74 crore) as its segment margin has expanded marginally by 40 bps to 13.7%. On the other hand the revenue of infrastructure equipment business was lower by 73% (to Rs 26.19 crore) and hit by sharp erosion in margin it turned red with its PBIT being a loss of Rs 4.88 crore compared to a profit of Rs 15.05 crore in the corresponding previous period.
The share of engines to total sales was about 85% for the nine month increasing from 71% in last fiscal. The increase in share of engines to total sales is largely on account of sharp fall in sales of infrastructure business which currently accounts for just 12-13% for nine months compared to 26% last fiscal. Of the total engines sales the automotive engines accounts for 66% of it and the agriculture engines accounts 20% and large engines for gensets etc accounts 15%.
The core automotive engines that contribute about 55% of the overall sales of the company currently is experiencing moderate pickup since Feb 2009 after a steep fall in November 2008-Jan 2009.
Sales volume of engines though dipped for nine month ended Mar 2009 the cost control/ efficiency methods are yielding fruits sustaining and improving margins in addition to lower material cost.
Engine realization has not improved during the quarter but the improved efficiency that is what has helped the company with marginally better margin.
There is definitely improvement in liquidity and the stimulus package has reduced the cost of the three wheelers. Moreover the price of fuel has come down bettering the cost of operation. The agriculture demand is least affected and this segment is showing healthy growth. All this augurs well for engine segment. However the steep fall in sales of infra equipment along with its high fixed costs has affected the profits of this business as well as overall performance of the company.
Interest is net of interest income on tax refund amounting Rs 4 crore. Total tax refund including interest on it amounts Rs 9 crore.
Both compactors and concrete machines were hit heavily on account of lower construction activity especially the slower road development for the former and slowdown in real estate for latter. The slow decision making as far as road infrastructure is hitting the compactor demand.
Introduced new series of engine (40-200 watts power) recently which is suitable for application in industrial, construction equipment etc.
Plant is fully flexible. More engines for single cylinder utilizing that capacity is not an issue. Secondly there is no debt related to that.
Capex incurred so far is around Rs 20 crore.