Huge jump in other income provides boost; revenue misses estimates
The country’s largest passenger car manufacturer, Maruti Suzuki India, on Tuesday beat analysts’ estimates by posting a net profit of Rs 1,486.2 crore during the April-June quarter, which was a rise of 23% on a year-on-year basis. The higher profits were on the back of a huge jump in other income, which increased by 134% to Rs 483 crore during the period on a yearly basis. The company’s revenue during the period saw a growth of 11.6% at Rs 14,927.3 crore, which was lower than estimates, hit by lower volumes. Net sales increased by 12.05 y-o-y to Rs 14,654.50.
“Profit in the quarter was helped by a higher turnover, material cost reduction, higher non-operating income and lower depreciation, though adverse foreign exchange movement reduced bottomline growth to some extent,” the company said in a statement.
Volume growth slowed down to 2.1% during the quarter against 14% during the same period last year. This was mainly due to the production loss of 10,000 units due to a fire at one of its vendor, Subros. The company sold 3.48 lakh vehicles during the period in the June quarter against 3.41 lakh units in year-ago period. Domestic sales grew by 5.4% to 3.22 lakh units while exports declined 27% on a yearly basis.
On the operational front, the company’s performance was largely in line with estimates. Operating profit grew by 2.25% year-on-year to Rs 2,215.7 crore but margins contracted by 140 basis points to 14.8%, hit by higher employee costs and other expenses, including marketing expenses, and yen appreciation.
“The advertising expenditures during the quarter have gone up significantly due to new products like the Baleno and the Vitara Brezza. This has significantly increased other expenses. Due to the loss of production volumes, the base effect has caught us but we will make it up in the coming months,” said Ajay Seth, chief financial officer, Maruti Suzuki.
According to the management of the company, the volume growth in the rural market has been flat while the urban market has done well, as new products like the Baleno and the Vitara Brezza have managed to attract a lot of traction there.
Due to production constraints in the two manufacturing capacities of the company, the waiting period for the Baleno and the Vitara Brezza is between seven to nine months.
“We are conscious of the fact that we have to stretch the production capacity in order to match the demand. We are paying very focused attention to the enhancement of the production of the two new models,” said a senior executive of the company in the post-earning conference call.
The company has earmarked Rs 4,500 crore for capital expenditure during the financial year. Out of that, R1,000 crore will be spent for maintenance of the two existing plants. Marketing expenses, especially on new and upcoming products, is also expected to remain around Rs 1,000 to Rs 1,100 crore during FY 17.