Maruti Suzuki India, India’s largest carmaker on Tuesday reported a nearly 12% decline in its net profit, despite registering a 12% increase in net sales. This is Maruti’s profit first fall in quarterly net profit in two years.
So what caused the profit to decline by 11.7%?
According to the carmaker, it was hit due by higher expenses and production loss due to the Jat agitation in Haryana. “Loss of over 10,000 units due to reservation agitation, increased advertising expenses and lower other income slightly impacted profits during the quarter,” Maruti said.
The company had posted a net profit of Rs 1,284.2 crore in the same period of the previous financial year, Maruti Suzuki India said in a statement.
Maruti had to suspend production at its Manesar and Gurgaon plants in February because of disruption in supply of components as a result of the agitation by Jats for reservation spreading across Haryana. he two plants put together roll out some 5,000 units of vehicles a day.
The automaker, which sells about one in every two cars in India, said net sales rose 12.5 per cent to Rs 14,930 crore. By vehicle numbers, sales rose 3.9 per cent to 360,402.
Analysts said the earnings were strong considering the company offset the impact of a weaker rupee versus the yen with a better product mix and reduced parts imports.
“The company has been impacted by an appreciating yen but only to the extent of royalty payment” to its parent, said Jigar Shah, head of research at Kimeng Securities India.
“In terms of material cost, the company managed some amount of import substitution and we believe they will continue to do that.”
The rupee fell 6.5 per cent against the yen during the period, its steepest in 15 quarters, raising the cost of parts from Japan.
Maruti targets double-digit growth this fiscal year, and Chairman R C Bhargava. However, Bhargava said the year will nevertheless be tough on many counts, with foreign exchange looking even less favourable and commodity prices rising.
While quarterly profit fell, Maruti Suzuki reported its highest-ever annual profit of Rs 4,571 crore for the year ended March 31, up almost 25 per cent.