Escorts' tractors business is likely to benefit from the brighter prospects for tractor sales in 1999-2000. The previous year's operational performance was marred by a lengthy labour strike and a slowing down in industry volumes. With the upbeat outlook in the current year, the company is projecting an industry growth rate of 8-10 per cent (against the previous corresponding year's 1.8 per cent).
The labour settlement will see manpower costs increase significantly during the year. However, it is also expected to lead to higher productivity which will neutralise the impact of the wage hike to some extent. Moreover, the company's modernisation programme is in the final implementation stage and this will ultimately lead to lower production costs and better quality. So much so that Escorts has confidently deferred its tractor expansion plan to next year.
The results will, however, take some time to reflect on the company's performance. Its sales have improved by 29 per cent in the quarter ended June 1999 but operating profit margins have fallen to 12.9 per cent (14.4 per cent). The performance in the next few quarters will determine to what extent margins are likely to improve due to the above efforts. Escorts is targeting a 24 per cent increase in tractor sales volumes aided by new product introductions in its existing range of Farmtrac and a new range of Powertrac which conforms to international specifications.
Escorts has Rs 486.67 crore parked in investments, accounting for about 31 per cent