M&M ploughs through with q1 net up 29%

Written by feBureau | Mumbai | Updated: Aug 14 2013, 10:28am hrs
Riding on the back of strong tractor sales, homegrown auto major Mahindra & Mahindra on Wednesday reported a higher-than-expected 29% surge in its net profit during the April-June quarter at Rs 937.9 crore. Analysts had estimated the company to post a net profit of Rs 907.5 crore. The company had posted a net profit of Rs 725.6 crore in the same period last fiscal, Mahindra said in a filing to the Bombay Stock Exchange. Despite challenging times that the automotive industry is witnessing, the maker of utility vehicles and farm equipment cited strong demand for tractor sales owing to good monsoon.

The company saw its total income from operations surge 7% to Rs 10,022.5 crore during the quarter as against Rs 9,367.4 crore in the same period last fiscal; lower than the analyst estimates of Rs 10,101.5 crore.

Despite a slowing manufacturing environment we delivered better-than-expected results. The operating margin went up for both the automotive and the tractor business, said Pawan Goenka, president, automotive and farm equipment sectors, M&M.

The domestic tractor industry delivered strong growth during the quarter and going forward we expect double-digit growth for the same, he said.

Goenka did not give any forward looking comment for the passenger and the commercial vehicle segment which continues to witness tough times.

During the quarter, the company sold 71,696 tractors in the domestic market compared to 56,861 tractors sold in Q1 last year, growth of 26.1%and a market share of 41.4%. The company's exports during the quarter grew by 5.5% to 3,187 tractors.

We were able to deliver better margins on the back of benign commodity prices during the quarter. Further, a better monsoon this year helped improve tractor sales, said Goenka. The operating margin for the current quarter is 14.5% compared to 12.5% in Q1 F2013.

Automotive segment volumes, however, remained flat as utility vehicle volumes witnessed a sharp slowdown following an increase in excise duty and also due to increasing competition in the segment.

The margin performance was led by softening of commodity prices, lower share of traded goods following a decline in automotive volumes and also due to greater share of tractors in the product-mix, said Yaresh Kothari, research analyst - automobile, Angel Broking.

Mahindra said its capex projections of Rs 7,500 crore for the company and Rs 2,500 crore for the subsidiaries will be maitained.

We are bullish about our future. And we will continue on our path of investing in that future... said Anand Mahindra, chairman, M&M.