Pawan Goenka, managing director of M&M, said at a press conference that the December quarter had been a challenging one both for the auto and tractor industries.
Mahindra & Mahindra (M&M) on Friday reported a 12% year-on-year (yo-y) rise in consolidated net profits to Rs 1,504.5 crore for the three months to December supported by an increase in other income to Rs 342.28 crore.
Profitability at the automaker took a hit with the Ebitda (earnings before interest, tax, depreciation and amortisation) margins falling by 150 basis points year-on-year to 13.2%. The operating profit was marginally up by 0.7% y-o-y at Rs 1,702.85 crore.
Revenues for the quarter stood at Rs 12,892.5, up 12% y-o-y driven up by 10% y-o-y increase in volumes of utility and commercial vehicles at 1,33,508 units and a 13% y-o-y increase in tractor volumes at 87,036 units. Pawan Goenka, managing director of M&M, said at a press conference that the December quarter had been a challenging one both for the auto and tractor industries.
“This was mainly because of the slow retail off-take during the festive season. That in turn was impacted by multiple factors ranging from rising oil prices, higher interest rates and commodity prices and the increase in vehicle prices due to regulatory changes. All of these came together to create a sentiment which led to a subdued demand in the festive season, which continued into November and December,” Goenka said.
In the farm equipment sector, the company sold 87,036 units in the quarter, up 13% y-o-y. The domestic tractor industry, however, expanded 19.2% at 2,17,054 units. “In the case of tractors, we focused on margins and gave up some market share in getting the profit margins and inventory right,” Goenka added.
In August last year, the management had raised its tractor guidance to 12-14% for FY19 from the earlier 8-10% owing to good monsoons and strong rural outlook. However, due to subdued sentiment the management has revised its tractor guidance to 10% for Q4FY19.
“Given how the month of December went and a flat January, our current estimate is that Q4FY19 will be flat due to high base of last year,” Goenka added. In the utility vehicle segment, M&M de-grew by 0.6% y-o-y for the quarter selling 51,219 units. While it increased its market share by 50 bps y-o-y, overall it has been losing share to Tata Motors and Hyundai.
The company plans to launch a new model XUV300 this month following the launch of Furio in January. The stock of M&M closed at Rs 683 on the Bombay Stock Exchange, down 2.64% over Thursday’s close. The stock has lost 26% in the last six months.