Maruti net jumps 49% to Rs 631.61 cr

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SummaryBeats Street estimates on forex gains, cost saving measures

Favourable exchange rates due to a weak yen, cost-cutting and the merger of its engine manufacturing subsidiary, Suzuki Powertrain, last fiscal saw the country’s largest car maker Maruti Suzuki India beat analysts’s estimate by posting a 49% jump in net profits at R631.61 crore during the April-June quarter. Net sales during period fell 5% at R9,995.12 on the back of sluggish consumer demand.

In the corresponding quarter last year, the company had posted a profit of R423.77 crore and net sales of R10,529.24 crore.

Higher export realisation on the back of forex gains had, in fact, also played a major role in the preceding quarter when Maruti posted record quarterly profits of R1,239.62 crore.

Maruti Suzuki chairman RC Bhargava said exchange rates played a partial role in boosting profits while cost savings on the back of worker suggestions for improved efficiency was a huge support. “The loss of the dollar (versus rupee) has been compensated by the gain in yen and as long as yen is weak, a weak rupee will have a limited effect. The whole industry is not doing well today, so the moment sales go up, these cost savings will be hugely beneficial,” he said.

Maruti, which along with the industry has lately seen demand for both diesel and petrol cars slowing down, cut production by 11% during the quarter at 2.68 lakh units by shut down at its Gurgaon and Manesar plants for several days — the two plants have an installed capacity of over 12 lakh cars annually. In June, output was reduced by as much as 25% to reduce piling inventories at the factory yard and dealers.

Average discounts during the quarter went up sharply by 34% to R13,400, compared with R10,000 in Q4FY13, according to analysts who attended the investor call. Asked if the company would look to delay the start of a new 2.5 lakh unit per annum production line at Manesar, company officials indicated that it could delay the start of the plant if the market demand continues to be sluggish in the second half, but as of now it is scheduled to start in September this year. The company’s shares at the BSE closed 0.12% down at Rs 1,414.20 on Thursday.

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