Q4 Results: M&M’s Profit Falls On Lower Tractor Sales
Net profit fell 16.1 percent year-on-year to Rs 969 crore, according to the vehiclemaker’s exchange filing.
Mahindra & Mahindra Ltd.'s profit for the quarter ended March declined but managed to exceed analyst estimates.
Net profit fell 16.1 percent year-on-year to Rs 969 crore, according to the vehicle maker's exchange filing. That's higher than the Rs 921-crore consensus estimate of analysts tracked by Bloomberg.
Revenue remained steady with a 4.7 percent growth at Rs 13,808 crore, higher than the Rs 13,343-crore estimate. The financials include numbers of its commercial vehicle unit—Mahindra Vehicle Manufacturers Ltd.
The bottom line was hurt by a lower margin and overall decline in sales volume. That can be attributed to a 14.9 percent fall in tractor sales during the quarter—compared with the industry’s 8.4 percent decline—due to weak agricultural incomes and a liquidity crunch among non-bank lenders, the company said in a statement accompanying its results.
“The muted demand in rural India on account of poor distribution of south-western monsoon, a deficit north-eastern monsoon and weak agricultural incomes due to poor price realisation, stress in the NBFC sector leading to tight credit conditions along with low demand in urban India and the overall sluggishness in the economy led to a fall in both the tractor and automotive industry during the fourth quarter,” it said.
Earnings before interest, tax, depreciation and amortisation fell 11.37 percent to Rs 1,768 crore while Ebitda margin contracted by 230 basis points to 12.8 percent—the lowest in five quarters.
The company's overall sales volume declined 0.4 percent during the quarter compared with the year-ago period.
New Government Gives M&M A Positive Outlook
The anticipation of a new government under Prime Minister Narendra Modi’s leadership gives a “cause for optimism” amid weak domestic activity in the second half of the last fiscal year, continued uncertainty on this year’s monsoon and muted global expectations, the company said.
“The 100-day plan mentioned by the Government also demonstrates the resolve of the new Government to hit the ground running,” the statement read.
It also said that a benign inflation projection—leading to expectations of a continued accommodative policy stance—coupled with improved bank credit off-take increased financial flows to the commercial sector and stabilise commodity prices, pointing to an economic recovery in the coming quarters.
Shares of Mahindra & Mahindra fluctuated between gains and losses to trade little changed at Rs 670 after announcing its March quarter results. That compared with 1.2 percent fall in the NSE NIfty Auto Index.
The stock has fallen 17.5 percent in 2019 so far, compared with a 10.2 percent fall in the NSE Nifty Auto Index.
