Mahindra net falls on material costs, currency loss

Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles and tractors, said earnings fell for the third straight quarter as the company paid more for raw materials and incurred a foreign exchange loss.Net income in the second quarter fell 21 percent to 2.27 billion rupees ($46 million), or 7.07 per share, from 2.86 billion rupees, or 10.69 rupees, a year earlier, the Mumbai- based company said in a release today. That topped the 2.06 billion rupees median estimate in a Bloomberg survey of 10 analysts. Sales in the three months ended Sept. 30 gained 10 percent to 30.9 billion rupees.

Mahindra, the Indian partner of Renault SA, spent 24 percent more for steel, rubber and other raw materials in the quarter after commodity prices gained. Managing Director Anand Mahindra bought a Chinese tractor maker and a domestic motorcycle manufacturer this year to boost earnings as India’s economic growth weakens.`Nobody is going to benefit because of commodity prices, at least for the next two quarters,” said Jinesh K. Gandhi, a Mumbai-based analyst at Motilal Oswal Securities Ltd. “Sales will also be affected by the economic slowdown. There will be pain.” He has a “buy” rating on Mahindra.

Steel prices last quarter gained as much as 33 percent while rubber prices rose by 29 percent, according to Gandhi.Mahindra rose 8.2 percent to 302.05 rupees at the close of Mumbai trading, having declined 65 percent this year.Vehicle sales increased 10 percent to 63,045 trucks, SUVs, cars and three-wheeled auto rickshaws in the last quarter, according to monthly statements from the company. Tractor sales in the last quarter increased 4.2 percent to 23,154.

The global financial market turmoil affects growth prospects and uncertainties are continuing, Mahindra said in the statement. Mahindra will focus its attention on controlling expenses and improving efficiencies.The company said it incurred a foreign exchange loss of 1.18 billion rupees in the July-September period because of the rupee’s decline against the U.S. dollar. The rupee fell 9.2 percent in the three months through September, its biggest quarterly loss since March 1992.

Mahindra in July took control of Kinetic Motor Co., the company’s first motorcycle-making acquisition, to tap the world’s second-largest motorbike market. The Indian government expects two-wheeler sales to rise 10 percent annually until 2015.The company is also looking to purchase motorcycle makers in China, Southeast Asia and Europe, Pawan Goenka, Mahindra’s president in charge of the automotive business, said on Sept. 3. In August, Mahindra bought a 51 percent stake in a Chinese tractor company to boost its presence in the world’s fastest- growing major economy.The overseas acquisitions come as the Indian economy’s growth is slated to slow more than previously estimated. The economy may expand 7.7 percent in the year ending March 31, the Reserve Bank of India said. That’s less than the 7.9 percent estimate in June.

Source:bloomberg.com

Related posts:

1. Germany – BMW 3Q net profit falls 63 percent Carmaker BMW AG said Tuesday net profit for the third quarter dropped 63 percent as the global economic turmoil made...
2. Toyota forecasts $4.95 billion annual loss; outlook dims Cascading red ink in North America and Europe prompted Toyota Motor Corp. today to forecast an annual loss three times...
3. Maruti Q2 net falls 37%, the lowest in 3 yrs Posting its lowest profit since September 2005, Maruti Suzuki, the country’s largest automobile company, posted a 37 per cent decline...
4. Mahindra to invest Rs.8 bn in used car business Auto major Mahindra and Mahindra Ltd plans to invest around Rs.8 billion ($174 million) in its used car business, being...
5. Higher input costs pushing up bike prices Higher input costs are pushing up motorcycle prices, with leading manufacturers like Hero Honda, Bajaj Auto and TVS Motor raising...