M&M Q3 Results: Profit Declines 73% On One-Time Impairment Provision
M&M’s net profit declined 73 percent year-on-year to Rs 380 crore in the quarter ended December.
Mahindra & Mahindra Ltd.’s quarterly profit tumbled on a one-time impairment provision.
Net profit declined 73 percent year-on-year to Rs 380 crore in the quarter ended December, according to an exchange filing. That compares with the Rs 914-crore consensus estimate of analysts tracked by Bloomberg. The financials include numbers of its commercial vehicle unit, Mahindra Vehicle Manufacturers Ltd.
The company made a provision of Rs 600.56 crore toward impairment of certain Investments, according to M&M’s financial statements.
Its revenue fell 6 percent over last year to Rs 12,120 crore, compared with the Rs 11,662-crore forecast. That came as sales of the Mumbai-based automaker declined 7 percent year-on-year to 2.16 lakh during the third quarter.
India’s automobile companies have been trying to push sales since the festival season of 2018. First, a rise in upfront insurance cost and higher fuel prices deterred buyers. Then a consumption slowdown curtailed purchasing power further. Discounts failed to lift sentiment, leading to production cuts as inventory piled up at dealerships. Sale of cars and utility vehicles fell to a record low in 2019.
M&M’s operational performance, however, met estimates. Operating income, or earnings before interest, tax, depreciation and amortisation, rose 1.4 percent year-on-year to Rs 1,793 crore. That’s against the estimated Rs 1,735 crore. Its operating margin expanded to 14.8 percent from 13.7 percent. Analysts had pegged the margin at 14.9 percent.
The improvement was a part of project Horizon 500 where the automobile business will improve its margin by 500 basis points over the next three years, Chief Financial Officer VS Parthasarthy told BloombergQuint in an interview.
Edelweiss, in a pre-earnings report, had said it expected M&M’s operating margin to improve on higher tractor sales, raw material benefits and its ability to cut costs.
“In December quarter, both the Indian auto and tractor industry have shown some signs of trend reversal and have seen moderation in double digit de-growth seen in the first two quarters of the year,” M&M said in the statement. “Good monsoons, festive season demand, improved liquidity conditions, new launches, especially in the utility vehicle segment and special schemes offered by OEMs (original equipment makers) were the key reasons for this moderation.
Shares of M&M had lost 4.5 percent during the quarter ended December, compared with a 7.1 percent gain in the benchmark Nifty 50 Index.
WATCH | CFO VS Parthasarthy on M&M's Q3 Results 2019-20