Alstom spends 28% more on employees in first quarter, but productivity falters
Moneylife Digital Team 08 August 2011

Employees' costs have shot up for the engineering company to Rs94 crore in the April-June 2011 period. Sales, however, have declined by 20% to about Rs280 crore

The cost of employees for Alstom Projects India increased by nearly a third in the first quarter of the current financial year, but strangely this has not produced any growth in sales which in fact decline by nearly 20% in the three-month period.

According to the figures announced by the company a few days ago, the payout for employees shot up by 28%, or about Rs20crore, to Rs 94 crore in the April-June 2011 period from the previous corresponding quarter. However, sales declined from Rs346.41 crore in the first quarter of 2010-11 to Rs279.63 crore in the first quarter this year, a surprising decline for the engineering and power equipment company.

Understandably, the company's operating profit nosedived from Rs51 crore in the first quarter last year to just Rs5 crore in the period this year. It would make shareholders wonder whether the additional compensation and benefits for the workforce has been worth it at all.

The Alstom stock has lost about 20% year-to-date. The share closed at Rs550.10 on the Bombay Stock Exchange today. It is down 8% since the first quarter results were announced on 1st August, against the 7% fall on the Sensex in this period.

The multinational company also provides railway equipment and technology solutions.

It has been a similar story in the previous quarters. Wages grew by 22% in the quarter to December 2010 and by half in the March 2011 quarter even though the number of employees increased only marginally from 3,899 in March 2010 to 3,941 in March 2011. So, it's not as if the company has taken on additional hands.

Then, has the company been paying out quarterly bonuses? A look at the break-up of employee's costs indicates that salaries, wages and bonuses were up by 12% from Rs222 crore in the entire financial year 2009-10 to Rs249 crore in 2010-11. The contribution to provident fund increased by 49%.

There was a major increase in contribution towards 'workmen and staff welfare expenses'. The contribution to 'employee welfare' more than doubled from Rs21 crore in FY10 to Rs45 crore in FY11. Full year sales were lower by 11%, whereas operating profit increased by 4% over the period.

Comments
Prakash
1 decade ago
Very good Analysis.Hardly any business channel was able to raise this point about productivity
Russell Davison
1 decade ago
The sales per employee for this company in Europe are also on a nosedive. They'll have to lose another 15000 employees to correct these disappointing sales figures and decreasing margins
Free Helpline
Legal Credit
Feedback