M&M Q1 net declines 17%

FOREX LOSSES PUT BRAKES ON AUTO MAJORS

Mahindra & Mahindra (M&M), India’s largest tractor and sports utility vehicle maker, reported a 17 per cent drop in its bottom line to Rs 159 crore in the quarter ended June 30 after it booked foreign currency loss of Rs 58.2 crore.

The forex loss was on account of the revaluation of $200 million of foreign currency convertible bonds issued in April 2006. The Indian currency dropped 6.9 per cent against the US currency in the quarter. Excluding the exchange loss, the profit-after-tax in the June quarter grew by 11.1 per cent over the same period a year ago. “Profits were also affected by a sharp increase in input costs leading to pressure on operating margins as well as by an increase in depreciation and finance costs,” a statement from the company said.

The company reported an operating margin of 9.9 per cent for the quarter, 50 basis points down than the corresponding period of the previous year. “Margins will remain under pressure,” said Piyush Parag, an analyst with domestic brokerage Religare Securities.

Net sales grew 26 per cent to Rs 3,293 crore on the back of a 13.1 per cent rise in tractor sales and a 21.6 per cent rise in multi-utility vehicles. But the company’s outlook pointed out that rising interest rates and uneven rainfall distribution might impact tractor sales.

The M&M scrip dropped 2.66 per cent on the Bombay Stock Exchange to Rs 513.50 after the company announced its earnings on a day when the benchmark Sensex rose 3.59 per cent.