M&M Q1 Results: Covid-19 Nearly Wipes Out Profit, Cuts Revenue By More Than Half
M&M’s passenger vehicles sales fell 78% year-on-year during the quarter compared to an 81.5% drop seen across the industry.
The pandemic has nearly wiped out the quarterly profit of India's largest tractor maker.
Mahindra & Mahindra Ltd.’s net profit fell 97% year-on-year to Rs 68 crore in the quarter ended June, according to an exchange filing. That compares with the Rs 210-crore consensus estimate of analysts tracked by Bloomberg. The company had seen a Rs 3,255-crore loss in preceding three months because of a one-time impairment.
M&M's revenue fell 56.4% over the year ago to Rs 5.589 crore in the April-June period, compared with the Rs 5,567-crore forecast, dragged by a low inventory pipeline and challenges in reviving production amid mounting coronavirus cases.
The company's earnings before interest, tax, depreciation and amortisation declined 67.9% to Rs 575.7 crore, while Ebitda margin contracted to 10.3% from 14%. The analysts had pegged the margin at 3.8%.
M&M results include the financials of Mahindra Vehicle Manufacturers Ltd.
India’s automakers are trying to push up sales since the Diwali festival season of 2018. First, an increased upfront insurance cost, coupled with a broader consumption slowdown hurt sales. Then the world's strictest lockdown to contain the Covid-19 pandemic stalled operations. The automakers reported a complete washout in April, while sales slightly recovered in May and June.
M&M’s passenger vehicles sales fell 78% year-on-year during the quarter compared with an 81.5% drop seen across the industry. The company in June, however, recorded the second-highest tractor sales it has ever seen, aided by rural demand.
M&M’s tractor sales for the quarter fell 22% year-on-year.
“The timely relaxation of the lockdown for the agricultural sector, along with positive rural sentiment led to good sales numbers for tractors during the quarter despite the supply chain issues, showing a positive growth rates in May and June 2020,” M&M said in the statement.
Outlook
A combination of lower income and heightened uncertainty is expected to drag consumer spending and business investment in the current financial year, the company said.
The agriculture sector and rural economy, however, will remain buoyant, supported by healthy rural spending by the government. Increased government spend on MNREGS and temporary rural work programme across districts will prevent rural distress, it said. Some concerns around a fall in remittance incomes remain, the statement said.
While the carmaker acknowledged positive effects of the Rs 20-lakh-crore package announced so far, it made a case for more. “There remains a need for further support from the government on the demand side and support for the more stressed sectors.”
M&M shares fell to the day's low after the announcement of the quarterly results. That compares with the flat Nifty 50 Index.