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INDIA: Mahindra and Mahindra income hit by costs and FOREX

By just-auto.com editorial team | 29 October 2008

Mahindra and Mahindra has reported a fall in second quarter net profits, on the back of higher costs and a loss on exchange rates, despite a rise in gross revenues.

India's utility vehicle maker said that gross revenues for the period grew by 14.1% to INR3695.2 crores (US$743.7m).

However, the group's net profit from ordinary activities after tax for the quarter fell to INR185.7 crores as against INR285.9 crores last year. 

"The lower profits are mainly on account of an exchange loss of INR117.8 crores suffered by the company due to rupee depreciation," the company said.

It added: "Both the automotive and farm equipment sectors of the company had a good sales performance during the quarter. However the runaway increase in the material costs in a highly turbulent economic environment which saw a precipitous fall in the value of Indian rupee and a steep climb in the interest rates exerted considerable pressure on our operating margins and profits."

Excluding the impact of the exchange loss and other special/ exceptional items, profit after tax during the quarter was INR237.8 crores as against INR217.4 crores in the same period last year - a growth of 9.3%.

Gross revenues in the first half reached INR7367.5 crores as against INR6212.4 crores in the corresponding period last year - a growth of 18.6%. The net profit for the first half registered another fall, however, to INR355.2 crores from INR477.1 crores last year.

The company said its second quarter domestic MUV sales volumes grew 8.9%, against the industry sales growth of 5.1%.

In the pick up segment, the company's volumes registered a growth of 20.2% in the second quarter while the industry growth was only 11.8%. Mahindra said its market share stood at 86.4% in the quarter as against 80.4% in the same period last year.

Meanwhile, the company said that it exported 2,941vehicles in the quarter, a 6.6% growth over exports in the second quarter last year.

Looking forward, Mahindra said: "Inflationary pressures in the Indian economy are moderating but with the ongoing financial crises all over the world, growth prospects are being impacted and uncertainties continue."

However, the company added: "In spite of global uncertainties, the forecast growth of 7 to 7.5% in India remains sustainable and there is a healthy demand for the company's products."