Mahindra & Mahindra (M&M), the country’s biggest utility vehicles and tractor maker, announced on Friday an eight per cent increase in standalone net profit at Rs 758 crore for the second quarter ended September 30, even as high material costs continued to dent margins.
The city-based company had posted a net profit of Rs 702 crore during the corresponding quarter a year earlier on the back of softened input costs and high vehicle sales.
M&M executives also mentioned at a briefing that an exceptional item of Rs 90.7 crore was recorded during last years’ quarter, which was a result of a sale of Mahindra Holidays shares.
Profitability was hit during the second quarter as margins from the farm equipment sector shrank due to a greater impact of the 300-basis point increase in material prices. Total expenditure rose 21.5 per cent to Rs 4,636 crore during the quarter.
Operating margin in the quarter was lower at 16.7 per cent compared to 18.24 per cent recorded in the same quarter last year. They were, however, higher when compared to the first quarter this year. Net sales of the company grew 19 per cent to Rs 5,311 crore during the reporting quarter against Rs 4,465 crore posted in the same quarter last year.
Price hikes on vehicles ranging from four to six per cent were undertaken in the last six months to offset input price hikes and hikes related to enforcement of new emission norms. This enabled the company to control any further impact on margins.
M&M expects a further increase of two-three per cent in material costs in the coming months but declined to state whether any of it would be passed on to the consumer.
Senior executives also mentioned that production of utility vehicles was hit during the quarter for inadequate component supply. However, the situation had eased out and production would happen on schedule, the executives noted.
President (Auto Sector) Pawan Goenka said: “We expect growth to be lower in the second half of the year compared to the first half.” Other income, comprising dividend from subsidiaries and joint ventures for the company, substantially went up to Rs 199 crore.
