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LATEST NEWS UPDATES | Tractor sales forecast cut as sowing area drops -Siddharth Philip & Swansy Afonso

Tractor sales forecast cut as sowing area drops -Siddharth Philip & Swansy Afonso

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published Published on Aug 26, 2012   modified Modified on Aug 26, 2012
-Live Mint

Mahindra and Mahindra Ltd, the world’s biggest tractor maker by volume, cut its forecast for sales growth of the farm equipment in India as the worst rainfall in three years delays crop sowing.

Mahindra estimates industry sales to expand as little as 2% in the year ending 31 March, Pawan Goenka, president of the automotive and farm equipment division at the Mumbai-based company, said in an email response on Thursday.

Goenka had earlier estimated sales to rise as much as 10%. Tractor revenue rose 22% at Mahindra last fiscal.

Below-average rains prompted farmer Sandeep Chakane, a cane grower in Maharashtra, to scrap plans to buy his second Deere and Co. tractor.

The area under monsoon crops in India, the world’s second largest producer of rice and wheat, dropped 6.2% as of 17 August, according to farm ministry data.

Rain was deficient or scanty in 45% of the country, the India Meteorological Department said on Thursday.

“There is no guarantee of a good crop this year because of less rain,” said Chakane, who was planning to spend Rs.6.5 lakh on the tractor to farm his 12 acres (48,562 sq.m) of land. “I will hold on to the cash.”

Mahindra, which has risen 12% this year, fell 1.2% to Rs.761.95 at the 3.30pm close in Mumbai, making it the worst performer in the BSE Auto Index. Escorts Ltd, India’s second largest publicly traded tractor maker, lost 1.8% to Rs.62.9

Deliveries of the farm equipment made up for 22% of Mahindra’s sales in the year ended 31 March. Selling utility vehicles such as Xylo and XUV500 accounted for 55% of its revenue.

Sales at the company co-founded by chairman Anand Mahindra’s paternal grandfather J.C. Mahindra and his partner, Ghulam Mohammed, in 1945, may rise 12% to Rs.66,430 crore in the fiscal, according to a median estimate of 10 analysts compiled by Bloomberg.

That’s the slowest pace of growth in four years, according to data compiled by Bloomberg.

Rice sowing dropped 3.4% to 30.8 million ha from a year ago, the farm ministry said. Cotton area declined to 11.02 million hs from 11.7 million ha, and oilseeds area slid to 16.1 million ha from 16.7 million ha, it said.

The spatial pattern of monsoon suggests that output losses could be substantial for coarse cereals and pulses, the Reserve Bank of India (RBI) said in its annual report released on Thursday.

The monsoon has been unsatisfactory to a degree that has dampened the prospects for agriculture during the year that started 1 April, according to the report.

The central bank on 31 July raised its inflation forecast to 7% as scanty monsoon stokes price pressures. The Reserve Bank cut its growth estimate for Asia’s third largest economy, which expanded at its slowest pace in almost a decade in the three months ended 31 March, to 6.5%.

Tractor sales may be little changed at 625,888 units in the 12 months starting 1 April after an 11% expansion a year ago, according to credit assessor ICRA Ltd.

Companies including International Tractors Ltd and Tractors and Farm Equipment Ltd, or TAFE, are tapping overseas markets and adding products to lure customers in the construction industry.

International Tractors, the maker of the Sonalika brand, plans to raise funds selling a stake and use the proceeds for acquisitions in Europe and expansion overseas, chairman L.D. Mittal said.

International Tractors’ exports surged 49% this year, Mittal said. TAFE forecasts it will add to the 22,000 tractors it sold in the US last year even as a drought ravages the North American nation, according company spokesman Vijaykumar Browning.

Mahindra sold more than 10,000 units in the US last year, according to its annual report.

The US market is doing well for us, Mahindra’s Goenka said. The company’s overseas sales increased 16% to 13,722 in the 12 months to March.

Overseas sales look promising through the inclusion of new export destinations, increased product offerings in the higher horse power segment and ramping up of capacities, said Subrata Ray, co-head for corporate-sector ratings at ICRA.

Firms have also expanded their product portfolio to come out with more application-based offerings, and to cater to niche market segments, he said. Weak demand in India and Latin America prompted Deere, the world’s largest maker of agriculture equipment, to cut its full-year profit forecast to $3.1 billion on 15 August from a May estimate of $3.35 billion.

Asia sales will drop moderately in the year because of softening in India and China, Deere said.

The US company accounted for 9.2% of India’s tractor market in the year ended 31 March. Mahindra controlled 39%, while TAFE had 24% share, according to ICRA. For tractor dealers in states such as Maharashtra, home to India’s commercial capital Mumbai, the drop in sales may be larger after a 30% rain deficit since 1 June. Customers who have booked tractors have left their cash deposits with me and are saying that they will only take delivery once the rains come, said Sopan Tupe, owner of a TAFE dealership in Pune, the state’s second largest city. Tupe expects to sell just half of the 100 tractors he sold last year.

Live Mint, 25 August, 2012, http://www.livemint.com/2012/08/24203447/Tractor-sales-forecast-cut-as.html?atype=tp


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