Escorts Kubota Q1 results: Net profit increases 19% as margins improve

The company, majority-owned by Japanese tractor maker Kubota, logged profit before exceptional items and taxes of ₹418 crore ($47.70 million) in the April-June period, compared with ₹350 cr last year

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India's Escorts Kubota posted a 19 per cent rise in first-quarter profit on Monday on improvement in its margins as higher tractor realisations and lower expenses outweighed weak demand for its construction equipment.

The company, majority-owned by Japanese tractor maker Kubota, logged profit before exceptional items and taxes of ₹418 crore ($47.70 million) in the April-June period, compared with ₹350 crore last year.

Shares of the company jumped 3.9 per cent after the results.

Lower discounts helped lift the company's per-unit revenue, or realisations, according to a pre-earnings note by Ambit Capital, pushing revenue in the tractor segment 0.5 per cent higher to ₹2,181 crore.

Meanwhile, expenses dropped 3.8 per cent on the back of an inventory gain during the quarter, compared to a charge the previous year.

As a result, its earnings before interest, taxes, depreciation and amortisation margin grew to 13.1 per cent in the first quarter from 12.4 per cent in the year-ago period. 

Still, overall revenue fell 2.2 per cent as sales of construction equipment slid about 24 per cent.

Escorts Kubota's tractor sales have underperformed the industry over several quarters, growing 0.7 per cent in the April-June period, compared to an industry-wide rise of 8.7 per cent.

Two analysts attributed this to the company's weak presence in high-growth markets like south India.