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M&M's lacklustre volumes drag earnings 

| Updated on: Aug 07, 2015

Weak volumes both on tractors and on on-road vehicles has impacted Mahindra and Mahindra's June quarter performance (standalone). 

 

While volumes dropped by 8 per cent over the same period last year, net sales fell by 3 per cent to Rs 9,708 crore and net profit too slipped by 3 per cent to Rs 852 crore. Considering the lacklustre volumes and subdued revenues, the fall in net profit could have been sharper. Benign commodity prices have helped the company rein in raw material costs and maintain operating margins almost at the same levels as the June 2014 quarter. Operating margins came in at 12.7 per cent, compared to 12.4 per cent a year ago. Another factor that helped earnings was lower finance costs, which dropped by 32 per cent to Rs 39 crore.

 

Outlook

 

After the cyclical slowdown in the auto industry, passenger car sales have gained steam in recent months. But utility vehicles don’t seem to be out of the woods yet. Industry volumes of utility vehicles have at best remained flat in the first three months of this fiscal over the corresponding period last year, compared to the 8 per cent growth seen in passenger car sales. With no major launches so far this year in the UV segment, except a refurbishment of the XUV 500,  M&M’s market share has gone down to about 38.5 per cent at the end of the first quarter, compared to 40.5 per cent a year ago. The launch of compact UVs in the latter part of this fiscal may help shore up volumes a bit. With no products in the compact UV category, M&M has been a big loser to vehicles such as the Ford Ecosport, Duster, and Mobilio.

 

With the monsoon catching up and sowing making good progress, M&M expects the farm equipment segment (about 35 per cent of revenues) to look up in the coming quarters. A low base from last year may also help volume growth in this segment.

The stock closed almost flat in trading on Friday at Rs 1,387.

 

Published on January 23, 2018

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