Maruti profit takes 22% hit on weak rupee

The country’s largest car maker Maruti Suzuki India on Saturday reported a decline of 22.8 per cent in net profit for the quarter ended June on the back of a depreciating rupee, which raised input costs.

The company recorded a net profit of Rs 423.77 crore during the quarter as against Rs 549.23 crore in the corresponding period of the previous financial year. This is the fourth consecutive quarterly decline in net profit for the company, which suffered production losses due to labour unrest at its Manesar facility for much of last year.

“Adverse currency movements, notably the yen-rupee exchange rate, impacted profits negatively,” the company said in a statement.

Net sales, however, increased 27.5 per cent to Rs 10,529.24 crore between April and June this year from Rs 8,256.58 crore in the year-ago period. The company added, “The growth in net sales was on account of higher total volumes, a favourable product mix and enhanced export realisations.” While volumes in the domestic market grew five per cent to 263,264 units due to robust demand for the Swift, DZire and Ertiga models, exports rose 5.8 per cent to 32,632 units. The offtake of models in the mini segment (Alto, M800, WagonR, Estilo) continued to suffer due to a lack of availability of diesel variants.

“Net sales grew by a strong 27.5 per cent, 11.3 per cent higher than our estimates due to an increase in the net average realisation. Net average realisation improved on account of price increases and a superior product mix with a higher share of Swift, Dzire and Ertiga in volumes,” said Yaresh Kothari, research analyst (automobile), Angel Broking.

The company’s net profit lagged analysts’ estimates due to a sharp rise in overall expenses, which rose as much as 31 per cent to Rs 10,331.77 crore during the quarter. While the expenses on raw materials increased 25.8 per cent to Rs 8,063.04 crore, other expenses grew 57.3 per cent to Rs 1,363.33 crore. Kothari said, “The rise in other expenses is on account of the impact of adverse forex fluctuations on royalty payments, which went up by as much as 140 basis points.”

The coming quarters may be tough, with the company having declared indefinite lockout at its Manesar unit on July 21. Violence at the facility had resulted in the death of a senior management executive and injuries to nearly 100 employees. Shares of the company have tanked nine per cent since the July 18 incident to close at Rs 1,110.65 apiece at the Bombay Stock Exchange on Friday.