Mahindra & Mahindra (M&M) Q4 97/98 earnings summary

Executive summary

• Core tractor and automotive operations outperformed a difficult market; income rose 14% and net profit increased 20.1% YoY.

• Strategy centered on utility vehicles and tractors, productivity improvements, R&D, and ERP integration; a 55% dividend was recommended.

Financial highlights

• Income was Rs 412,795 lakh vs Rs 362,047 lakh in FY97; profit before tax was Rs 32,947 lakh vs Rs 32,833 lakh.

• Net profit reached Rs 25,147 lakh vs Rs 20,933 lakh; EPS was Rs 24.33 vs Rs 20.56.

• Proposed dividend rose to 55% (Rs 5.50/share) from 50% (Rs 5/share).

• Operating cash flow was negative Rs 2,690 lakh, vs positive Rs 35,212 lakh in FY97; working-capital changes included a large rise in receivables.

Outlook and guidance

• Current-year first two months: automotive sales were 9,804 vs 10,513 YoY, while market share rose from 52% to 54%; tractor sales were 11,980 vs 12,319, with share at 30.5%.

• Rural and semi-urban demand was expected to be relatively resilient; higher government spending on agriculture and infrastructure was expected to support demand.

• ERP rollout was expected to be complete by April 2000; planned IT investment exceeded Rs 100 crore over four years.

• Project Scorpio was targeted for launch by the turn of the century; the proposed Mahindra Research Valley would support product development.

• MSSCL expected new northern and western processing facilities to expand trading opportunities and volumes in FY99.