Escorts Kubota India Reports 7.5% Drop In Q3 Profit Due To Higher Input Costs

On Wednesday, Indian tractor maker Escorts Kubota Ltd reported a 7.5% drop in quarterly profit as margins were squeezed by persistently high raw material costs.

The increased input costs overshadowed a nearly 11% increase in tractor sales, which was driven by an above-average monsoon and a good sowing season.

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

Total expenses increased by 22.3% to 21.14 billion rupees, with material costs increasing by 40%. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin fell to 8.4% from 14.1% the previous year.

According to an exchange filing, 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.

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

To offset the higher costs, the company raised the prices of its tractors beginning November 16.

"While the impact of inflation on margins may take some time to normalize," said Chairman and Managing Director Nikhil Nanda in an exchange filing.

Escorts' total tractor sales for the third quarter increased 10.7% to 28,025 units, indicating strong rural demand.

Mahindra and Mahindra Ltd reported a 13.8% increase in total tractor sales for the third quarter, indicating strong demand due to a good sowing season.

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