The slowdown in the auto sector is worsening. India?s largest car manufacturer, Maruti Suzuki, on Thursday announced that its third-quarter net profits had dipped by 54.27% to Rs 213.57 crore, compared with Rs 467.04 crore a year earlier. Second quarter profits had fallen 36.5% y-on-y.
However, the company?s shares rose 4.67% on the BSE on Thursday to close at Rs 544.80 after touching an intra-day high of Rs 553.50 as investors saw Wednesday?s fuel price cut boosting auto demand. Despite the crimp in auto sales, the sustained drop in steel prices is expected to assist bottomline recovery next quarter.
The rise in the share price also took account the fact that the company suffered on account of forex movements. Since the Japanese yen has appreciated by almost 53% vis-?-vis the rupee in the last year, it added to the import bill. A fifth of Maruti?s raw materials are bought in yen.
To help offset its profitability decline, Maruti has raised the price of its recently introduced A-Star by Rs 10,000. For the upper B segment SX4, the price has risen by Rs 9,000. There will also be rises in the price of the Alto and Swift, both of which are market leaders in their respective categories.
Maruti?s profits have now declined for the third successive quarter this year. In the first quarter, its net profit slid 6.8% to Rs 465 crore. ?The reduction in net profit has been mainly due to lower volumes, a rise in material costs and adverse impact of currency changes in the fiscal. In addition, a higher provision for depreciation, owing to more stringent depreciation norms adopted by the company in March 2008, impacted the net profit,? the company said.
The industry, which is reeling under the impact of high interest rates denting consumer demand, saw total passenger car sales decline by 6.9% in December. Cumulative sales between April and December dipped marginally by 0.28% at 8,64,449 units, against 8,66,860 units in the corresponding period of the last financial year. Passenger car sales constitute 11.9% of the total automobile industry.
Maruti Suzuki has a passenger car marketshare of 51.9% in terms of cumulative sales. Despite the overall slowdown, its sales have held up, registering a dip of only 1.26% at 5,55,529 units, compared with 5,62,623 units in the corresponding period of the last financial year. In December, it notched up the highest-ever monthly retail sales at 76,700 units following the launch of the A-Star. But overall, Q3 sales tumbled 14% at 1,73,494 units, y-on-y.
While Maruti Suzuki is the first car company to announce its third-quarter results, the country?s largest vehicle manufacturer Tata Motors, which is scheduled to announce its third-quarter results on Friday, is expected to also see a dent in margins because of a steep decline in sales of commercial vehicles during the quarter.
According to an analyst, Maruti has also suffered because of an increase in other expenditure during the quarter like payment of royalty on models like the Swift and DZire. For the third quarter, such expenditure went up by 43.6% to Rs 556 crore, compared with Rs 387 crore in the same quarter last fiscal. The company?s total income dipped marginally by 0.85% to Rs 4,803 crore, against Rs 4,844 crore.