Misses Street estimates as higher effective tax rates, expensing of part of additional payments to landowners impacts bottom line.
Maruti Suzuki, the country’s largest passenger vehicle maker, reported a 10% growth in its net profit for Q4FY18, but missed Street estimates as higher effective tax rates and expensing of a part of additional payments to landowners (Rs 250.70 crore) impacted its bottomline. The company’s shares closed 2% down on the BSE on Friday.
The Indian arm of Japanese auto-maker Suzuki closed the fourth quarter of FY18 with a net profit of Rs 1,882 crore, against Rs 1,711 crore for the same period last year. However, viewed from an operating perspective, the performance looks better. The earnings before interest, depreciation, tax and amortisation (EBIDTA) grew 18% to Rs 3,015 crore in the fourth quarter this year from Rs 2,560 crore in the corresponding quarter of the previous fiscal. EBIDTA margins too improved to 14.24% from 12.34%. The operating EBIT grew still faster at 24.4% in Q4FY18 over the same period last year.
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The company said that the key reasons for margin movement were cost reduction efforts, partially offset by adverse commodity prices. Maruti Suzuki chairman RC Bhargava told a news channel that commodity costs have gone up and that royalty for the year came down to 5.4% from 5.8% (in the last quarter the royalty was higher due to a stronger yen), leading to impact on margins.
During the quarter, the company reported a 14.4% growth in its net sales Rs 20,594 crore against Rs 18,005 crore in the same period last year. This was aided by an 11.4% growth in vehicle sales volumes to 461,773 vehicles.
For the full year, Maruti Suzuki reported a growth of 5% in its standalone net profit to Rs 7,722 crore against Rs 7,350 crore in the preceding fiscal. “Increase in effective tax rates and lower non-operating income due to mark-to-market impact on the invested surplus, compared to last year impacted net profit,” said the company.
“The operating profit was Rs 9,304 crore, a growth of 20.1% over the same period previous year on account of higher sales volume, and cost reduction efforts, partially offset by adverse commodity prices,” the company said.
“India is one of the key markets for Suzuki and hence Maruti’s performance is critical for them. It is the market they are doing well in,” said VG Ramakrishnan, founder partner and MD, Avanteum Advisors, an advisory and consulting firm focused on key sectors including automobiles.
Ammar Master, senior manager, LMC Automotive, said, “We believe Suzuki will continue to focus on India, strengthen its business in China, expand products in ASEAN, and sustain volumes in Japan.”
Net sales for FY18 standalone stood at Rs 78,105 crore, a growth of 17% over the same period last year. The operating EBIT grew by 20.1% in FY18 over the same period last year. On a consolidated basis, the company reported a net profit of Rs 7,881 crore against Rs 7,511 crore for the same period last year, a growth of 5%.
During the year, Haryana State Industrial & Infrastructure Development Corporation (HSIIDC) has revised the demands to Rs 972 crore, after adjusting Rs 374 crore paid by the company under protest in earlier years. In an earlier year, pursuant to courts orders, HSIIDC had raised demands on the company, amounting to Rs 1,032 crore towards payment of enhanced compensation to landowners its land at Manesar, Haryana. During the last quarter the company cleared the demands by paying Rs 923 crore, of which Rs 250.7 crore has been charged to the P&L for the quarter.
The board of directors recommended a dividend of Rs 80 per share of face value Rs 5 for FY18.
The board of directors also gave its in-principle approval to set up two funds to commemorate the 35-year anniversary of the company. These are Employee Welfare Fund and a trust to promote scientific research and technology in India. The details of the fund and the trust are yet to be worked out, but once they are set up, MSIL will contribute 1% of the profit after tax of the previous year each to the fund and the trust.