M&M reports over 11 pct fall in net profit during December quarter

Despite the improvement in sales, homegrown auto major Mahindra & Mahindra Friday reported 11.44 per cent decline in standalone profit at Rs 1,076.81 crore for the quarter ended December 31, 2018, mainly on the back of higher expenditure. The company had posted a PAT of Rs 1,215.89 crore in the same quarter last fiscal. Total income during the period under review stood at Rs 13,411.29 crore as against Rs 11,676.05 crore in the year-ago quarter, registering a growth of 14.86 per cent.

During the quarter, vehicle sales stood at 1,33,508 units as against 1,21,786 units in the same period last fiscal, a growth of 10 per cent. "There have been challenges in the auto sector. The sentiment during the festive season was subdued mainly on the back of various factors like oil prices, exchange rate fluctuation, commodity prices increasing, inflation, increase in vehicle prices due to axle load norms and not so favourable monsoon," company's managing director Pawan Goenka told reporters here.

He further said passenger vehicle sales for the festive season did not match the industry expectation primarily due to softening of urban demand. "We, however, managed to pass on the high material cost to some extent to the customers but not fully. Also, because of the model mix, we managed to achieve these numbers, even as the auto industry reported a flat growth during the period," Goenka added. He also noted that the company had offered nearly 6-8 per cent higher discount during the festive season which resulted in margins dropping by nearly 40 bps.

"A further decline of about 120 bps in margin was because of not being able to pass on all the commodity prices to the consumers. In all, the margins have been impacted by 160 bps largely because of these two factors," Goenka said. The company exported 12,363 vehicles during the latest quarter, as compared to 11,426 units in the year-ago period, up 8 per cent.

During the quarter, the total domestic automotive volume for the company grew by 9.6 per cent with the LCV< 2T (mini truck segment) and the LCV 2-3.5T pik-up segment growing by 37.5 per cent and 14.4 per cent respectively over the corresponding quarter previous year. Its tractor sales were also up 13 per cent to 87,036 units in the third quarter as against 76,943 units in the year-ago period.

"Last quarter I had given a guidance of 12-14 per cent for margins for the tractor sector, with being more biased to 12 per cent. But given the way the months of December and January have been, when the sector was flat at four per cent, we would like to revise our guidance to 10 per cent," he said. Goenka further said the growth in the sector will continue to remain flat even in the fourth quarter, which is likely to improve after the implementation of Bharat Standard VI norms.