Mumbai: Mahindra & Mahindra, India's largest tractor maker, more than doubled its net profit for the third quarter ended December due to one-time gains on account of the sale of assets in subsidiaries and a change in ownership interest in a joint venture company.
Operating profit, however, declined 24% to ₹1,806 crore on account of falling tractor and automotive volumes, high commodity prices and shortage of semiconductor parts.
The net profit stood at ₹1,353 crore, with revenues registering a growth of 9% to ₹15,239 crore. The operating profit (Ebitda) margin for the quarter slipped 510 basis points year on year to 11.9%.
"The company delivered steady revenue growth, despite the supply chain challenges that we have faced. We have seen margin pressure due to high commodity prices and lower operating leverage," managing director Anish Shah said in his review of the quarter. "Despite that, profit after tax is up two and half times. This is due to the capital allocation decision taken last year."
On the automotive front, Mahindra & Mahindra claims demand is strong and the booking momentum is sustaining and the company is sitting on an order backlog of 155,000 units, with a waiting period running into six months. While the company has taken multiple measures to ramp up production and secure additional sources of semiconductors, it said the challenges surrounding chip shortage are likely to persist for another 6-9 months. The company estimated it lost about 20,000 units of sales on account of chip shortage in Q3.
On its superior margin tractor business, despite a 9% fall in volumes for the quarter, the farm equipment division delivered its second-highest margin in Q3. The company's market share during the quarter rose 140 basis points.
The challenges, however, in the farm equipment business remain. The company has revised its guidance downward from flat to low single-digit growth earlier in the year to negative 6% for FY22.
It attributes the volume pressure on tractor sales to the lower government spending in rural areas and falling disposable incomes of farmers. These two factors along with the monsoons will play a critical role in determining the recovery going ahead. It is, however, hopeful a record rabi crop will boost farm incomes in the coming month.
Operating profit, however, declined 24% to ₹1,806 crore on account of falling tractor and automotive volumes, high commodity prices and shortage of semiconductor parts.
The net profit stood at ₹1,353 crore, with revenues registering a growth of 9% to ₹15,239 crore. The operating profit (Ebitda) margin for the quarter slipped 510 basis points year on year to 11.9%.
"The company delivered steady revenue growth, despite the supply chain challenges that we have faced. We have seen margin pressure due to high commodity prices and lower operating leverage," managing director Anish Shah said in his review of the quarter. "Despite that, profit after tax is up two and half times. This is due to the capital allocation decision taken last year."
On the automotive front, Mahindra & Mahindra claims demand is strong and the booking momentum is sustaining and the company is sitting on an order backlog of 155,000 units, with a waiting period running into six months. While the company has taken multiple measures to ramp up production and secure additional sources of semiconductors, it said the challenges surrounding chip shortage are likely to persist for another 6-9 months. The company estimated it lost about 20,000 units of sales on account of chip shortage in Q3.
On its superior margin tractor business, despite a 9% fall in volumes for the quarter, the farm equipment division delivered its second-highest margin in Q3. The company's market share during the quarter rose 140 basis points.
The challenges, however, in the farm equipment business remain. The company has revised its guidance downward from flat to low single-digit growth earlier in the year to negative 6% for FY22.
It attributes the volume pressure on tractor sales to the lower government spending in rural areas and falling disposable incomes of farmers. These two factors along with the monsoons will play a critical role in determining the recovery going ahead. It is, however, hopeful a record rabi crop will boost farm incomes in the coming month.
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