Escorts Ltd has cut production and raised prices of tractors by INR 7,000 in January to improve its profitability after a tough first quarter (ending December 31).

This is because collections from retail sales in the quarter fell at least 5 to 6% behind its expectations, as demand in the industry dropped to single digits from double digits last year. The tractor and farm equipment major follows an October to September fiscal.

Mr Nikhil Nanda Joint MD told Business Line that the move was part of a multi pronged strategy to preserve cash and reduce inventory levels. At present, the company can make 4,000 to 7,500 tractors a month across its Faridabad based facilities.

He said that “We're maintaining pre defined inventory levels in the pipeline. There are many reasons for the fall in demand, the farmers' disposable incomes have reduced as Government off take is lower in some cases, while minimum support prices are also under pressure.”

Escorts, however, is optimistic that its performance during the fiscal year will be an improvement over the last, with strong growth coming in the third and fourth quarters. He added that “There is a compression exercise on in raw material costs, which will help save cash. Also, ours is a seasonal business, so most of the sales happen between end February through to July.”

(Sourced from BL)