Production shutdowns due to Covid, higher raw material prices as well as chip shortages, dented Maruti Suzuki’s earnings during the April-June quarter with the company missing analysts estimates on all the fronts. The worst was the operating margin, which as a result of higher raw material prices came at a multi-year low — if last year’s negative numbers are excluded which was an aberration due to national lockdown.
Lower sales volume, which was a result of production shutdowns and closure of dealerships due to the second wave of Covid, saw net profit at `441 crore. Though this was an improvement since the company had a net loss of `249 crore in the same quarter last year, it was just half of `878.72 crore that Bloomberg’s analysts’ consensus had estimated.
Coming on a lower base, the company’s revenue from operations at `17,771 crore was up 333% on a year-on-year basis. However, it remained much below estimates of `18,171 crore. The sales in the first quarter remained far below the previous high in Q1FY19 as well.
Maruti sold a total of 3,53,614 units during the June quarter — an over 4x jump compared to the June quarter last year, when it had total sales of 76,599 units, but a 28% fall against 4,90,479 units sold in the June 2019 quarter. “The second wave of the pandemic adversely impacted the Q1 production and sales. While all parameters this quarter were substantially better than Q1FY21, a comparison is not meaningful because Q1 last year had a much higher degree of disruption due to the pandemic,” the company said in a statement.
The Ebitda (earnings before interest, tax, depreciation and amortisation) came in at `821 crore against analysts’ expectation of nearly `1,110 crore, on the back of adverse commodity prices and lower non-operating income. The company had reported a negative Ebitda of `863 in the quarter ended June 30, 2020. Consequently, the Ebitda margins came in at 4.6% during the quarter. Prior to this, the lowest margins reported by the company was 6.3% in Q2FY13. In Q1FY21, Maruti had reported an Ebitda margin of -21%.
“Commodity prices increased steeply but the company continued to make efforts to reduce costs,” Maruti said. Automobile manufacturers are facing a tough ride as rising commodity prices have been impacting them adversely, but the room for passing on price increases to customers is limited due to subdued demand.
Maruti’s performance deteriorated on a sequential basis as well, with the company’s net profit tumbling 62% and revenue from operations plummeting 26% quarter-on-quarter.
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