* Profit falls 9.9 pct, more than expected
* Tractor sales sluggish, input costs up 46 pct
* Auto sector strong, XUV500 sales soar
(recasts, adds quotes, details, analyst)
By Henry Foy
Feb 7 Mahindra & Mahindra Ltd,
India's biggest utility vehicle maker, reported a
bigger-than-expected 9.9 percent fall in quarterly profit as
rising commodity costs squeezed margins, and cautioned on a
continued slowdown in tractor sales.
Indian automakers have struggled over the past six
months as rising input costs dent margins and high interest
rates curb once-soaring sales growth in Asia's third-largest
"Given how material costs have moved during the quarter, and
we are not able to pass these on 100 percent... our
profitability will come down," Pawan Goenka, president of
Mahindra's automotive and farm equipment sectors told reporters,
in reference to the December quarter.
Material costs rose an annual 45.9 percent during
the quarter, to account for 73.7 percent of net sales against
69.2 percent a year previously.
Mahindra, one of the world's top three tractor
manufacturers, said on Tuesday net profit fell to 6.62 billion
rupees ($135 million) for the quarter from 7.35 billion rupees a
year earlier. Revenue rose 37 percent to 83.27 billion rupees.
Analysts on average had expected a profit of 6.96 billion
rupees on revenue of 79.73 billion rupees, according to Thomson
Shares in Mahindra, valued at about $8.6 billion, closed
down 2.9 percent at 689.65 rupees in a Mumbai market
that closed down 0.48 percent.
The flagship company of the $14.4 billion Mahindra Group saw
sales of its tractor brands rise 12 percent during the quarter,
slightly below the industry average of 12.7 percent, its third
straight quarter fall in growth.
"That is a surprise for us," Goenka said in response to the
sales slump. "It's a concern that the industry is slowing down
to almost becoming flat growth."
Goenka said industry sales Growth would continue to remain
sluggish, between 0-5 percent in February and March, after a
lacklustre January, but would rebound to 8-10 percent growth
during the fiscal year that begins in April.
AUTO SALES POSITIVE
Mahindra's on-road vehicle range includes the recently
launched XUV500 high-end off-road sports utility vehicle (SUV)
and lightweight three-wheeled commercial trucks.
Passenger utility vehicle sales rose an annual 23 percent
during the quarter, the company said on Tuesday.
Car sales in India have slumped in the past six months, as
high interest rates deter customers typically dependent on
loans. Sales growth will likely be flat in the fiscal year that
ends in March, an industry body said last month.
Mahindra is the dominant player in India's SUV market and
only produces diesel cars, a key factor that helped it
outperform rivals during the sales slowdown on a surge in
popularity for cars using the fuel.
Government subsidies make petrol around 60 percent more
expensive per litre than diesel, leaving some petrol-focused
manufacturers in a bind amid reports that the federal budget
next month will impose a tax on diesel vehicles.
"Mahindra's auto division is very healthy for the company at
the moment and it has certainly had a positive impact on the
numbers for the past quarter," said Yaresh Kothari, auto analyst
at Angel Broking in Mumbai.
"Looking forward, much will depend on the budget and whether
there is a cost increase for diesel cars and the form it takes."
The XUV500, which reopened sales bookings last month, has
had over 25,000 applications from buyers for just 7,200
vehicles, the company said on Tuesday.
Mahindra, which exports the vehicle to South Africa, is keen
to begin sales of the XUV500 in Chile, Australia and some
European countries when domestic demand moderates, Goenka added,
without providing a timeframe.
($1 = 49.0600 Indian rupees)
(Editing by Rajesh Pandathil & Subhadip Sircar)