Slack tractor sales, input costs hit M&M

Mahindra and Mahindra (M&M), the commercial and passenger vehicle maker, reported 6.36 per cent decline in its net profit for the first quarter ended June 30, 2007, on fall in sales of tractors, high material costs and lower export realisation.

The company posted a net profit of Rs 191.17 crore for the quarter against Rs 204.17 crore last year. Income from operations (net of excise) grew by 16.83 per cent to Rs 2,612.77 crore compared with Rs 2,236.24 crore a year ago.

Though the company reported an increase of 37 per cent in sales growth of vehicles (excluding tractors) during the quarter, selling 46,356 units, strengthening of rupee against foreign currencies affected the profit growth, a company release stated.

Automotive segment, which includes utility vehicle (UV), commercial vehicles and passenger cars, contributed Rs 1,504 crore towards sales of the company, a growth of 21 per cent over Rs 1,243 crore last year.

Ashutosh Goel, auto analyst, Edelweiss securities, said, "Results for the quarter have been in line with the expectation. The farm equipment segment witnessed a flat growth even as the sector grew marginally. However, the company will see growth in the next quarter on account of better performances from Logan, the sedan car that company manufacture jointly with French auto-maker Renault, and from its tractor division".

Besides Logan, the all-new Scorpio range and the Bolero also helped the automotive sectors post positive results. The UV segment grew by 23 per cent during the quarter.

Sales of tractors fell by 4 per cent to 75,340 units during the quarter. The farm equipment segment, which includes tractors, tractor engines and other parts, recorded a growth of 9.72 per cent to Rs 1,038 crore for the quarter compared with Rs 946 crore reported during the same period last year.

M&M is the market leader in the tractor segment with over 43 per cent market share.

Mahindra and Mahindra aims to leverage the strengths of PTL, which it recently acquired.

M&M has proposed to spend Rs 6,400 crore in the next three years. The amount will be spent on expansion of capacities and research and development and product development, the chairman of M&M, Keshub Mahindra said at the company's annual general meeting in Mumbai today.