India's Escorts Kubota posts 7.5% drop in Q3 profit on higher input costs

BENGALURU (Reuters) - Indian tractor maker Escorts Kubota Ltd reported a 7.5% fall in quarterly profit on Wednesday, as margins were pressured from persistently high raw material costs.

The inflated input costs overshadowed a nearly 11% jump in tractor sales that was driven by an above-normal monsoon and a healthy sowing season.

The company's net profit fell to 1.86 billion rupees ($22.54 million) in the three months ended Dec. 31, from 2.02 billion rupees a year earlier.

Total expenses jumped 22.3% to 21.14 billion rupees, with the cost of materials surging 40%. The earnings before interest, taxes, depreciation and amortization (EBITDA) margin declined to 8.4%, from 14.1% a year earlier.

 

Escorts also incurred a one-time expense of 727.6 million rupees due to a loss in the sale of investment in the joint venture Tadano Escorts, it said in an exchange filing.

The company's revenue from operations rose nearly 15% to 22.64 billion rupees, boosted by a 12.4% rise in the agricultural machinery products segment and a 10.7% jump in the construction equipment segment.

To offset the higher costs, the company increased prices of its tractors from Nov. 16.

"While inflation impact on margin may take some time to normalise, the overall macroeconomic factors remain favourable for overall economic growth," said Chairman and Managing Director Nikhil Nanda, in an exchange filing.

Escorts' total tractor sales for the third quarter had risen 10.7% to 28,025 units, underscoring strong demand in rural areas.

Automaker Mahindra and Mahindra Ltd reported a 13.8% jump in its total tractor sales for the third quarter, flagging strong demand on the back of a healthy sowing season.

($1 = 82.5150 Indian rupees)

 

(Reporting by Dimpal Gulwani; editing by Eileen Soreng)