Kirloskar gains from revival in manufacturing

Revival in Indian economy has given armfor Kirloskar Oil Engines Ltd (KOEL). The company has managed to post higher sales as the manufacturing sector revived in the financial year '04. Its sales have crossed Rs 10 billion-mark during the year, which is a major milestone for the company.

The company has witnessed 18 per cent growth in sales over the pervious year. According to market analysts, sales growth was a direct fall out of revival in the Indian economy, especially in the manufacturing sector. The growth in economy has resulted in good demand for the companies products in engineering and maufacturing sectors.

There was higher demand for power generating sets, construction and machine handling machinery and automobile components. The company has made major inroads into export market espcially in Europe and the US.

KOEL exports engines, pumpsets and generating sets to the developing countries. It is maintaining its thrust on increasing exports to Europe and US markets.

During the last year, exports were Rs 632 million (Rs378mn in FY03) and accounted for 6.2 of the total turnover.

The company is now set a target of Rs 1 billion export revenues during the current year.

The company has managed to show higher operating margin during past year despite the fact that prices of iron and steel, which are the basic raw materials, have increased significantly during the year. Raw material cost increased by 17 per cent yoy but as a percentage of sales it increased only by 57 bps.

KOEL has also kept other costs under control, which enabled it to show higher operating margin. The company has also made considerable progress in meeting strict emission as well as noise norms for diesel generating sets. It is now marketing these products under the Kirloskar green power ideas brand.

Sales for generating sets in the 15 to 600KVA range, increased by 20 per cent in value and 25 per cent in terms of units in FY 04. Auto components segment contributed to about 10 per centof the total turnover, virtually unchanged from FY03. Sales increased by 13 per centon the back of buoyant automobile sector.

KOEL also manufactures grey iron castings and trades in oil and power generation.

These businesses contributed to 20 per cent of the total sales and recorded 6 per centyoy growth in FY04.