Cost cuts help Mahindra & Mahindra but rural sales pinch

The countryu0027s largest utility vehicle and tractor manufacturer Mahindra & Mahindra on Friday beat analystsu0027 estimates by posting...

By: | Updated: March 21, 2016 12:26 PM

Mahindra & Mahindra sale

On a standalone basis, Mahindra and Mahindra's net profit and revenue declined 3.4% each to Rs 852.2 crore and Rs 9,830.4 crore respectively. (Reuters)

The country's largest utility vehicle and tractor manufacturer Mahindra & Mahindra on Friday beat analysts' estimates by posting a consolidated net profit of Rs 831 crore during the April-June quarter, down 7% on a year-on-year basis, aided by cost-saving measures. However, revenue was below estimates with a decline of 3.9% at Rs 9,437 crore due to lower sales volume of both passenger vehicles as well as tractors.

The consolidated results of the company include M&M and Mahindra Vehicle Manufacturers.

On a standalone basis, net profit and revenue declined 3.4% each to Rs 852.2 crore and Rs 9,830.4 crore respectively.

Consolidated operating profit (Ebitda) declined 4.7% to Rs 1,353 crore and margin remained flat at 14.3%. The company's raw material cost saw a decline of 5.4% to Rs 6,426 crore during the period.

The company sold 1.71 lakh vehicles in June quarter, down by 8% compared to the same period last year. Auto sales volumes declined 3% year-on-year to 1.09 lakh units.

Gr9

“The utility vehicle segment continued to be under pressure and degrew by 0.6%. The light commercial vehicle segment continues to be in negative but the medium & heavy commercial vehicle segment continued to grow on the back of improvement in industrial activity, movement in infrastructure projects and some replacement demand,” the company said. Tractor volumes declined 16% to 62,385 units hit by uncertainty surrounding the prospect of a good kharif crop.

“This year the monsoon is important as the increase in disposable income of farmers are dependent on that. If we have a good harvest then then there will a growth during the festive season. With the launch of the Jeeto and the impending arrival of TUV 300 and S101, we will see growth in volumes,” Pawan Goenka, M&M executive director said.

The company has lost market share in the utility vehicle segment as it does not have products in the compact SUV segment which constitutes 40% of the volume of the UV segment. Poor demand in the rural market has pulled down the tractor and utility vehicle sales.

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