Better operating margins due to stable raw material prices and cost control coupled with smart inventory management helped auto major Mahindra & Mahindra to report an 11.7 per cent rise in net profit to Rs 934 crore for the three months to December despite a drop in sales.
The company does not see much pick up in auto sales next fiscal but in the best-case scenario, it could grow at 8-10 per cent, M&M Group Executive Director and President (automotive businesses) Pawan Goenka told reporters today.
Net standalone sales fell 2 per cent to Rs 10,405 crore in the third quarter ended December from Rs 10,642.60 crore a year ago, while revenue from the automotive segment dropped to Rs 6,453.16 crore from Rs 7,360.50 crore last year.
Goenka attributed the tepid set of numbers to a fall in overall sales, which declined 10 per cent, led by the passenger utility vehicle segment, and said the Quanto, XUV5OO and Verito vehicles have been a drag on the company for some time now.
During Q3, M&M sold 54,164 vehicles, a drop of over 11 per cent, taking its market share down to 38.2 per cent. In the car segment, it sold 1,967 Veritos and Verito Vibes. The company said exports were down over 14 per cent to 8,492 units.
On a consolidated basis, net profit rose 9.3 per cent to Rs 1,000 crore as against Rs 915 crore in Q3 last year. The numbers were helped by better-than-expected tractor sales, which rose 20.6 per cent.
Gross revenue and other income of Mahindra & Mahindra and Mahindra Vehicle Manufacturers for the quarter stood at Rs 11,270 crore as against Rs 11,522.3 crore.
Group Chief Financial Officer V S Parthasarathy said the deceleration in gross revenue in the quarter was due to the challenging times the auto industry is passing through, with volumes shrinking by 11.7 per cent in Q3.
"Despite this, the company could deliver a healthy increase in operating margins, which increased by 150 bps to 15 per cent during the quarter due to a strong sales performance by its farm equipment sector and a tight control on material costs and all expenses," he added.
Following the good monsoon, tractor sales rose to 1,81,566 in Q3 from 1,50,562 units a year ago, up 20.6 per cent. Domestic sales at 76,362 units grew 22.1 per cent.
The farm equipment sector clocked a revenue of Rs 4,098.67 crore, up from Rs 3,403.97 crore a year ago.
Parthasarathy said tractor exports were hit due to tighter emission norms in the US and a steep duty hike in Sri Lanka. Shipments to these two markets were down 40 per cent.
