Maruti Suzuki profit rises modest 4.4 pct in Q1, even as sales of Alto, Wagon R rise

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Published: July 28, 2017 5:04:28 AM

Maruti Suzuki on Thursday reported a modest increase in net profits of 4.4% y-o-y for the quarter ending June 30 at Rs 1,556.4 crore. The profits were dragged down by a substantial increase in overall expenses, taxes and compensation paid to the dealers before the GST rollout.

Maruti Suzuki, Maruti Suzuki profit, sales of Alto, sale of Wagon R, GST rollout, Vitara Brezza, Ertiga hybrid, M&MProfits were dragged down by a substantial increase in overall expenses, taxes and compensation paid to the dealers before GST rollout. (Image: Reuters)

Maruti Suzuki on Thursday reported a modest increase in net profits of 4.4% y-o-y for the quarter ending June 30 at Rs 1,556.4 crore. The profits were dragged down by a substantial increase in overall expenses, taxes and compensation paid to the dealers before the GST rollout. The company reported revenues of Rs 17,132 crore, up 16.7% y-o-y, which were slightly short of Bloomberg consensus estimate of Rs 17,594 crore. Ajay Seth, chief financial officer, Maruti, said sales were subdued post the roll out of the GST in July though they were looking up. “We will have to wait till August to understand the full impact of the GST on the retail sales,” Seth said.

Operating profit margins at the country’s biggest carmaker contracted 150 basis points year-on-year to 13.6% as expenses rose. Consequently, the operating profit or Ebitda (earnings before interest, tax, depreciation) increased by just 5.22% y-o-y to Rs 2,331.2 crore. India’s largest passenger vehicle manufacturer reported higher volumes during the quarter, up 13.2% y-o-y to 3.94 lakh units. That was despite wholesale despatches remaining subdued in June before the roll out of the goods and services tax (GST).

Higher raw material expenses, excise duty and other expenses took a toll on the operating profit. Raw material expenses increased by 15.74% y-o-y and as a percentage of net sales it increased by a whopping 270 basis points to 71.6% from 68.9% in Q1FY17. Seth said some compensation was given to the dealers for clearing out the existing stock before the GST which had an adverse impact of 50 basis point on the margins. “There were schemes that were floated to boost the retail sales in June which also impacted the margins,” Seth said.

As result of the higher marketing and advertising spends due to the launch of new vehicles and compensation given to the dealers before the roll out of GST, other expenses also increased by 13.34% y-o-y to Rs 2,295.8 crore. The deferred tax paid during the quarter also increased significantly by 344% to Rs 184.5 crore. “The commodity prices, especially rubber have gone up substantially from the corresponding period and also slightly sequentially. We are expecting moderate increase in prices of raw materials in the current fiscal. Overall it should be steady,” added Seth.

During the quarter Maruti emerged as the largest utility vehicle manufacturer in the domestic market as result of the healthy increasing in demand for Vitara Brezza and Ertiga hybrid. Maruti’s market share in the segment increased to a record 30% while the same for M&M decreased to 27%.
Due to the overall revival in demand in the rural and semi urban markets whole sales dispatches of Alto and Wagon R also increased during the quarter.

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