Otis Elevator Co

As per company sources, in the past few years its actual sales were around 60 per cent of the order book position. Currently, Otis has an order backlog of two years with the execution of around 3,700 elevators remains pending. Moreover, in the stagnant market, competition and imports from multinationals like Mitsubishi and Hyundai intensified in the last year due to a recession in their respective domestic markets.

This sales growth is largely due to the increase in contribution from service income. Service income, which accounted for 31.5 per cent of its total sales in 1996-97, made up for 34 per cent in 1997-98. Here, apart from a market share of 60 per cent of the installed elevators base, Otis also benefited from its thrust on customer service through its interactive customer response software system.

 

Besides improved sales growth, Otis also managed to improve its operating profit margin from 11.4 per cent to 12.9 per cent. Company sources attribute this to steps taken to improve productivity and cut down expenditure by downsizing the workforce. Otis has cut down its workforce by 25 per cent in the last five years.

If not for a higher provision of Rs 2.76 crore under voluntary retirement scheme in 1997-98 against Rs 1.07 crore in 1996-97, profit before tax growth would have been higher at 11.3 per cent against the current 5.4 per cent.

Substantial reduction in tax outflow, which fell from 41.8 per cent in terms of profit before tax in 1996-97 to 26.5 per cent enabled Otis to register 33 per cent growth in its net profit to Rs 20.35 crore. Despite a healthy order book position of Rs 320 crore on March 1998, Otis still awaits a recovery in construction activity to improve performance.