India’s Escorts Kubota posts first-quarter profit rise as margins improve

India’s Escorts Kubota posted a 19% rise in first-quarter profit on Monday on improvement in its margins as higher tractor realisations and lower expenses outweighed weak demand for its construction equipment.

The company, majority-owned by Japanese tractor maker Kubota, logged profit before exceptional items and taxes of4.18 billion rupees ($47.70 million) in the April-June period, compared with 3.5 billion rupees last year.

Shares of the company jumped 3.9% after the results.

Lower discounts helped lift the company’s per-unit revenue, or realisations, according to a pre-earnings note by Ambit Capital, pushing revenue in the tractor segment 0.5% higher to 21.81 billion rupees.

Meanwhile, expenses dropped 3.8% on the back of an inventory gain during the quarter, compared to a charge the previous year.

As a result, its earnings before interest, taxes, depreciation and amortisation margin grew to 13.1% in the first quarter from 12.4% in the year-ago period.

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Still, overall revenue fell 2.2% as sales of construction equipment slid about 24%.

Escorts Kubota’s tractor sales have underperformed the industry over several quarters, growing 0.7% in the April-June period, compared to an industry-wide rise of 8.7%.

Two analysts attributed this to the company’s weak presence in high-growth markets like south India.