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Maruti Suzuki feels squeeze as costs hit India’s top carmaker

Maruti recorded a profit of Rs 10.13 billion ($126.79 million) for the quarter that ended on June 30, compared with Rs 4.41 billion a year ago when production was hampered by COVID-19-related disruptions.

Maruti Suzuki feels squeeze as costs hit India’s top carmaker

Maruti Suzuki India, the country’s top carmaker, said on Wednesday rising raw material costs had eaten into its margins despite more sales at higher prices, hurting quarterly profit which came in below analyst estimates.

Maruti recorded a profit of Rs 10.13 billion ($126.79 million) for the quarter that ended on June 30, compared with Rs 4.41 billion a year ago when production was hampered by COVID-19-related disruptions. Analysts, on average, had expected a profit of Rs 15.95 billion, according to Refinitiv data.

“The increase in prices of commodities adversely impacted the operating profit . The company was forced to increase prices of vehicles to partially offset this impact,” Maruti said in a statement.

Maruti, which sells every second car in India and is majority-owned by Japan’s Suzuki Motor Corp (7269.T), increased prices six times from January 2021 to June 2022, while cutting back on discounts as demand rebounded from pandemic lows.

Maruti’s shares rose as much as 2.1 per cent after it reported its quarterly results. The carmaker reported sales of 467,931 vehicles for the June quarter, up 32.3 per cent from the same period a year ago.

However, sales could have been higher if not for a semiconductor shortage that resulted in 51,000 vehicles not being produced, Maruti said. This took its total order backlog to 280,000 vehicles at the end of the quarter.

The company’s average selling price per car during the quarter was Rs 540,385, versus Rs 475,057 a year ago, helped by higher sales of its compact cars and sport utility vehicles (SUVs).

Earnings before interest, taxes, depreciation, and amortization margin – a key measure of profitability – stood at 7.2 per cent. Analysts had expected an EBITDA margin of 8.8 per cent, according to Refinitiv data.

Total revenue from operations came in at Rs 265 billion, compared with Rs 177.71 billion a year earlier.

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