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M M net drops 39 on weak rural demand

Hit by weak rural demand for tractors and lack of new products in utility vehicles, M&M’s net profit dropped 39%.
M M net drops 39 on weak rural demand

Hit by weak rural demand for tractors and lack of new products in utility vehicles, Mahindra & Mahindra’s (M&M) net profit dropped 39 percent in the final quarter of the previous financial year. It recorded a stand-alone net profit of Rs 551 crore for the quarter ended March, against Rs 897 crore posted in the same quarter in 2013-14.

Absolute vehicle sales dipped by 10 percent in the quarter to 123,175 units, against 136,487 units posted in the year-ago period. Total tractor demand dipped to 38,604 units. Passenger vehicle sales, including utility vehicles (UVs), fell 57,937 units, a decrease of seven percent.

M&M’s UV market share dipped to 38 percent, far less compared with 43 percent recorded in the same quarter in 2013-14. Tractor market share dipped to 35 percent, compared with 38 percent in the year-ago period. Net sales for the quarter dipped by 13 per cent to Rs 9,411 crore, against Rs 10,837 crore posted in the year-ago period. This was higher than Bloomberg estimate of Rs 8,873 crore.

M&M said a partial revival in sales will depend on monsoon — crucial for tractor demand — and on new products in the UV space this year.

Pawan Goenka, Executive Director, M&M, said, “All eyes are on the Kerala coast. Monsoon will be more important this year than earlier years. We expect the second half of the year to bring a change in rural demand.” Industry-wide sales of tractors hit a 12-year low during the quarter as unseasonal rains destroyed standing crops across Maharashtra, Uttar Pradesh and Punjab. The farm equipment business generates 35 per cent of the total revenue for the company.

“If monsoon is normal, we expect the tractor industry to grow by five to six percent this year,” Goenka added.
 

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