M&M Q2 results update
Last updated: 10 Nov, 2020 | 03:22 pm
- Profit recovers: M&M's net profit recovered from the previous quarter (profit of ₹68 cr in Q1) on the back of record tractor sales for the last few months. M&M has reported a profit (before exceptional item) of ₹1,311 crore in Q2FY21, down 3% YoY. Analysts had earlier anticipated a net profit of about ₹1,040 crore. This excludes an exceptional item relating to impairment of non-current assets in respect of certain subsidiaries and impairment of certain investment in a joint venture. Including the impairment, the net profit drops to ₹162 crore on a consolidated basis, down 88% YoY.
- Margins rise: M&M's EBITDA jumped 34% on-year to ₹2,063 crore. The EBITDA margin improved to 17.8% from 14.1% earlier. Strong performance in tractors, and cost optimisation helped the company to expand its operating margin.
- Revenue rises: M&M's revenues rose 6% on-year to ₹11,590 crore. This was mainly aided by robust tractor sales. India's tractor industry had its best-ever Q2 in terms of sales, which rose 41.4% over the year earlier. M&M said that it expects the momentum to continue into the ongoing festive season. M&M's tractor sales were higher by 31% on-year to 89,597 units.
- Commercial vehicles still under pressure: M&M's commercial vehicle segment remained under pressure as sales of its trucks and buses fell 40.5% from the previous year to 23,936 units.
Higher tractors sale has helped M&M to post a good set of numbers in the quarter. The exceptional items on account of impairments have led to a drop in the profit after tax in the current quarter as compared to the corresponding quarter in the previous year.
Timely relaxation of the COVID lockdown restrictions for the Agricultural sector, good increase in MSP for Kharif crops and important reforms in the agri sector announced by the government have helped tractor demand to bounce back after April 2020. M&M said that it expects that tractor demand will remain robust during the upcoming festive season. Manufacturing capacity utilisation is expected to recover in Q3 and activity to gain some traction from Q4 onwards. However, capex and exports are likely to remain subdued for the company.