Mahindra Q2 net profit trebles on strong sales, cost cuts

Mahindra Q2 net profit trebles on strong sales, cost cuts

Mumbai: Mahindra & Mahindra Ltd on Thursday said quarterly net profit nearly trebled helped by cost cuts and strong sales but a weak monsoon and rising input costs could hurt going forward.

The strong results sent its shares up as much as 5.6% on the day. At 3 pm, the shares were up 4.5% at Rs933 ($19.7).

Net profit in the quarter to September were also helped by a gain of Rs596 million from the sale of a part stake in unit Mahindra Holidays and Resorts through an IPO, it said in a statement.

“The country experienced its severest drought in recent history," it said. “The adverse impact that this is likely to have on agricultural output and incomes and demand for non-agri goods and services is a source of some concern."

India’s farm output suffered this year after the worst dry spell in nearly four decades hit the northern parts of the country.

Mahindra, which sells Scorpio, Bolero and Xylo utility vehicles said its volumes climbed at double the rate of the industry at 43.7% in the quarter. Tractor numbers grew 32.4%, it said.

Total expenditure as a percentage of net sales fell to 85.5% from 97.5% a year ago, its profit and loss account showed as the company focussed on cost cuts.

But it expects raw materials costs to rise 4-5% by the year-end, its farm equipment division head A Choudhari said at a news conference.

The company, which also runs a joint venture with Renault for the mid-sized sedan Logan, said net profit soared to Rs703 crore from Rs247 crore. Sales rose more than a third to Rs4,465 crore, it said.

A Reuters poll of 11 brokerages forecast net profit at Rs373 crore on net sales of Rs3,887 crore.

Meanwhile, a senior official of the company said that it is difficult for India’s largest utility vehicles maker to raise prices, despite rising input costs.

Mahindra will have to take a hit on margins because of rise in input costs, said Pawan Goenka, head of the company’s automotive division, adding he was concerned about the rise in sheet metal and tyre prices.

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