• JUNE 13, 2001

Industrial slowdown hits Cummins 4Q

Cummins India has recorded a 17% growth in profits and a 4% rise in topline for the year ended March '01. The company's revenues in the fourth quarter dropped by about 2% and operating margins fell by 60 basis points. This has affected the overall financial performance.

(Rs m) FY00 FY01 Change
Sales 8,258 8,603 4.2%
Other Income 211 227 7.6%
Expenditure 6,897 7,103 3.0%
Operating Profit (EBDIT) 1,361 1,500 10.2%
Operating Profit Margin (%) 16.5% 17.4%  
Interest 34 19 -44.1%
Depreciation 246 262 6.4%
Profit before Tax 1,292 1,445 11.9%
Tax 359 356 -0.7%
Profit after Tax/(Loss) 933 1,089 16.7%
Net profit margin (%) 11.3% 12.7%  
No. of Shares (eoy) (m) 198.0 198.0  
Diluted Earnings per share 4.7 5.5  
P/E (at current price)   11  

Cummins performance in the first nine months of the year was good with a 22% jump in profits and 7% sales growth. However, a slowdown in the economy has taken its toll on the company's turnover growth and also depressed margins in 4QFY01.

The company's efficient working capital management enabled it to reduce interest cost by 44% in FY01. This has resulted in higher net profits for the year.

During the fourth quarter, Cummins has further invested Rs 25 m in the share capital of Cummins Power Solutions Ltd (CSPL). It had invested Rs 35 m in the previous quarter in the (CSPL) wholly owned subsidiary. The company has also infused Rs 35 m in its subsidiary Cummins Infotech Ltd. The move of the company is expected to enhance its service focus.

At the current market price of Rs 58 Cummins is trading at a P/E of 11 times FY01 earnings. Historically, the stock has traded at P/E levels of 30-35 times its earnings. The company is a dominant player in most of the segments it is present in and is better geared to take advantage when the outlook improves.

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