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M&M profits up 152% on lower input costs, takeover

M&M profits up 152% on lower input costs, takeover
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First Published: Thu, Jul 30 2009. 11 05 PM IST

Better margins: M&M’s Keshub Mahindra (left) and Anand Mahindra at the firm’s annual general meeting in Mumbai on Thursday. PTI
Better margins: M&M’s Keshub Mahindra (left) and Anand Mahindra at the firm’s annual general meeting in Mumbai on Thursday. PTI
Updated: Thu, Jul 30 2009. 11 05 PM IST
Mumbai: Auto maker Mahindra & Mahindra Ltd (M&M) on Thursday posted a forecast-beating 152% rise in profit, boosted by its February takeover of Punjab Tractors Ltd and strong sales of utility vehicles. However, the company said a weak monsoon, which has been 19% below average since June, was a concern.
Better margins: M&M’s Keshub Mahindra (left) and Anand Mahindra at the firm’s annual general meeting in Mumbai on Thursday. PTI
India’s top utility vehicles and tractor maker said there were signs in data and output of a return of consumer confidence. Its utility vehicles sales rose 28.5% during the quarter to 48,720 vehicles from the corresponding period a year ago. Total auto sales increased 23.8%, from 82,608 in the June quarter last year to 102,280 units this quarter.
The company reported a net profit of Rs401 crore, up from Rs159 crore a year earlier. Net sales rose to Rs4,229 crore from Rs3,287 crore a year ago.
A Reuters poll of 14 brokerages had estimated quarterly net profit at Rs302 crore on net sales of Rs4,052 crore.
“The increase in profit is largely due to an improvement in operating margin by 450 basis points, possibly due to reduction in commodity prices,” said Jatin Chawla, an analyst at India Infoline Ltd.
One basis point is one-hundredth of a percentage point.
Chawla said the company’s raw material-to-sales ratio had gone down significantly during the quarter, although the company said volatility in commodity prices remained a concern.
Domestic tractor sales, including Swaraj tractors, rose 14% during the quarter to 42,130 units. Mahindra said its takeover of Punjab Tractors helped consolidate its position in the domestic tractor market and boost competitiveness.
Shares in M&M, valued at about $5 billion (Rs24,250 crore), on Thursday rose 1.2% to Rs852.05 on the Bombay Stock Exchange (BSE). BSE’s 30-share sensitive index, or Sensex, closed 1.41% higher at 15,387.96 points.
M&M’s shares have risen 210% so far in 2009 to become the best performing stock on the Sensex, which has risen nearly 60% in the same period.
Auto sales in India were hit hard in 2008 first by high interest rates and then a credit crunch and economic slowdown.
Car sales have picked up in 2009 as low interest rates and easier credit have pushed demand, while categories such as medium and heavy truck are yet to recover.
Earlier this week, Tata Motors Ltd, India’s largest auto maker, reported an unexpected 58% rise in its June quarter net profit, helped largely by lower costs and a change in accounting policy that saw lower foreign exchange-related losses.
Last week, leading car maker Maruti Suzuki India Ltd said its profits rose by 25%, riding on export demand, higher prices, newer models and lower costs.
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First Published: Thu, Jul 30 2009. 11 05 PM IST