Maruti Suzuki posts 5% rise in Q3 profit
THE COMPANY HAS RAISED PRICES LESS THAN MOST OF ITS RIVALS, AND THAT WILL GIVE IT AN EDGE IN THE MONTHS AHEAD
NEW DELHI: Maruti Suzuki India Ltd, the country’s largest carmaker, on Tuesday said its fiscal third quarter profit rose 5.2% from a year earlier on lower taxes, cheaper inputs and costcutting efforts.
Net profit rose to ₹1,564.8 crore in the three months ended December 31 from ₹1,489.3 crore a year ago. Net sales rose 3.8% to ₹19,649.1 crore, as vehicle sales rose just 2% to 437,261 units, despite the firm offering discounts.
A Bloomberg survey of analysts expected profit at ₹1,586.8 crore and revenue of ₹20,876.6 crore. Shares of Maruti Suzuki fell 2.05% on BSE on Tuesday, while the benchmark Sensex index declined 0.46%.
Passenger vehicle sales in India have steadily declined since August 2018 as payment defaults by Infrastructure Leasing and Financial Services triggered a liquidity squeeze that spread to other shadow banks, including those that financed vehicle purchases. Increase in vehicle prices due to the introduction of new safety and emission norms dampened demand further.
Maruti Suzuki executive director (sales and marketing) Shashank Srivastava said the company has raised prices less than most of its rivals, and that will give it an edge in the months ahead and Maruti’s share in petrol engine car sales should also go up as a result.
“During the quarter, additional car buying has come down but replacement of vehicles by customers increased. Also, discounts have come down and that’s across the industry. There won’t be much room for pre-buying since we don’t have much stock. Out of the 52,000 units of stock we had at the end of the quarter, only 8,700 units were diesel vehicles,” Srivastava said at a conference call with analysts.
The company’s earnings before interest, tax, depreciation and amortization grew 8.9% to ₹2,102 crore from ₹1,931 crore a year ago. Total tax paid by the company during the quarter was 22% lower at ₹441.5 crore.
Maruti’s operating margin widened 30 basis points to 10.1% during the quarter, despite heavy discounts, and advertising and marketing costs. The muted performance indicates the slowdown is far from over and heavy discounts to reduce stocks are hurting financials.
Average discounts offered by the New Delhi-based automaker during the quarter soared 37.5% to ₹33,000 from ₹24,000 a year ago. Consequently, the realization per unit fell 5.7% year-on-year to ₹4.7 lakh per unit. According to Ajay Seth, chief financial officer of Maruti Suzuki, one of the reasons the margins were lower than expected was the higher discounts offered during the quarter. Without them, margins would have expanded another 130-140 basis points, he said.