Cummins India: Slowing global demand behind flat revenues

The September '12 quarter for Cummins India turned out to be quite a modest one as revenue growth was almost flat to Rs 1086 crore year on year. Anant Talaulicar, Chairman & MD, Cummins India, attributed the same to the slowing global demand that resulted in export decline of 28% sequentially while the company's global sales dropped by 7% on account of slowdown in the power generation sector.

The profit after tax, however, grew 25% since Sep '11 quarter with the company having effectively checked its costs, especially the cost of raw material.

The raw material cost as a percentage to sales, for Cummins India, declined from over 61% to less than 59% year on year. While there was some increase in the employee cost for the quarter, the company's total expenditure as a percentage to sales improved sharply from 85.4% in Sep '11 quarter to 82.7% in the Sep '12 quarter, enabling the company to improvise on its operating margins.

Cummins India's earnings before interest, tax and depreciation (EBITDA) margin improved by nearly 300 basis points year on year to over 17% for the quarter. The management has attribute the same to a favourable business mix and cost reduction programs that the company has been initiating for quite some time now.