Going At Full Throttle

Updated: Jul 25 2004, 06:04am hrs
The recent Budget aims at the development of rural and agriculture sectors and talks about increasing agri-credit. This augurs well for companies manufacturing products that may experience a boost in demand due to rural development. One such company is Kirloskar Oil Engines from the stable of Kirloskar Groups. The company is into engines and auto components. It manufacturers engines that find application in agricultural machinery, tractors & irrigation pumpsets, construction, material handling and equipment for marine sector and armed forces.

The company has posted a 6 per cent growth in net sales to Rs 239.7 crore for the quarter ended June 2004 from Rs 226.4 crore in previous June quarter. The net profit has zoomed 40 per cent over the same period to Rs 16.17 crore.

The total expenditure has increased by 7.6 per cent to Rs 225.9 crore. Consumption of raw materials (net of stock) has increased by a modest 3.7 per cent to Rs 166.6 crore, while the growth in staff costs is far higher at 26 per cent to Rs 22.5 crore.

This has culminated into an operating profit of Rs 31.7 crore, a growth of 16.8 per cent. Interest outgo has come down from Rs 1.28 crore to Rs 60 lakh, while this quarter shows an extraordinary expense item of Rs 3.88 crore, which includes provision for warranty claims recognised in accordance with accounting standard 29 on provisions and contingent liabilities/assets. The earnings per share (EPS) of the company has improved from Rs 5.96 to Rs 8.33.

For the year ended March 31, 2004, the company had posted a net profit of Rs 70.8 crore on back of net sales of Rs 1002.5 crore. Segment-wise revenue break-up for the June 2004 quarter shows engines business at Rs 191.03 crore, accounting for 74 per cent of the total. The revenues in this segment have increased by 22.5 per cent. Auto component revenues comprise 10 per cent of the total revenues, while other businesses account for the rest.

The share of engines business in the total profit is 78 per cent at Rs 11.6 crore, while auto components at Rs 2.2 crore comprise 15 per cent.

The company banks on its accumulated knowledge and experience derived from a multiplicity of projects. It manufacturers medium engines like R1040 liquid-cooled, which is a four stroke diesel engine with features such as direct injection, compression ignition and integral cylinder head.

The stock of Kirloskar Oil Engines has fallen by 28 per cent from the 52-week high level of Rs 389.9 in January 2004 to Rs 279 on July 22, 2004. However, the current price is way ahead of Rs 158 prevailing a year ago, which was also the 52-week low.

The Kirloskar Group is a $500 million engineering conglomerate specialising in areas like power, construction, mining, agriculture, transport, oil & gas and environment protection.

Kirloskar Oil Engines, incorporated in 1946, is the manufacturer of widest range of diesel engines in India. Its business areas include engines, engine bearings, valves, diesel generating sets and grey iron castings. The diesel generating sets are used in industry, households and the service sector comprising banks, telecom establishments, commercial buildings and hotels. They also offer generating sets over one MW that run on heavy fuel oils. Engine bearings and valves find application for OEM use in auto and other engines.

The company has manufacturing plants in Maharashtra in Pune, Nashik and Ahmednagar.

The company, along with Punjab Tractors, has a 50.5 per cent stake in Swaraj Engines. Kirloskar provided the technology required for the plant, which is located near Chandigarh.