The Hindu Business Line : Elgi Equipments full-year net profit down 40 pc

WITH its bread and butter product — water drilling equipment — facing a sharp fall in demand, the air compressor major, Elgi Equipments Ltd (EEL), has decided to re-jig it product mix with greater focus on the industrial segment and exports during the current fiscal.

The company, whose sales (net of excise duty) for the year 2004-05 declined by about 2 per cent andnet profit tanked by about 40 per cent for 2004-05 compared to the previous fiscal, expects the change in the product mix to bring about a 15 per cent topline growth during the current fiscal.

Speaking about last year's financial performance, a company source told Business Line on Monday that the company had anticipated a fall in demand for compressors used for drilling wells and expected the demand recession to hit the second half's performance.

But the demand slackened two months after the beginning of the financial year 2004-05 and this had an adverse impact on the financial performance.

In fact, in the segment-wise revenue reported by the company, the sale from compressors dropped to Rs 231.61 crore against Rs 250.26 crore in 2003-04.

The company source did not expect any revival in the demand for water drilling equipment during this year and said fall in demand in this segment lasted for two to two-and-half years. He said the company had seen a substantial growth in other segments, particularly industrial equipment and exports. While exports grew by 86 per cent, from Rs 29 crore to Rs 54 crore, the growth in industrial segment was around 25-30 per cent.

The company has decided to re-draw its business strategy,he said.

During 2004-05, EEL registered gross sales of Rs 313.2 crore compared with Rs 327.3 crore in 2003-04. The net sales, after adjusting excise duty, was Rs 285.2 crore ( Rs 290.5 crore). Net profit before extraordinary item (VRS compensation, loss on investment and actionable claim written off) fell sharply to Rs 21.8 crore (Rs 38.5 crore).

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