Net profit up 16%, to give record dividend
Baleno, Brezza drive sales; more pressure seen on margins ahead
Maruti Suzuki India Ltd’s fiscal fourth quarter profit rose 16% as India’s largest carmaker sold more units of its pricier Baleno and Vitara Brezza models.
Net profit rose to ₹1,709 crore in the three months ended March from ₹1,476 crore a year ago, Maruti Suzuki said on Thursday. That compares with the ₹1,771 crore quarterly profit estimate of 24 analysts surveyed by Bloomberg. Net sales rose 20.3% to ₹18,005.2 crore.
A rise in sales of the Baleno and Brezza, full capacity utilisation and cost reductions contributed to the higher profit, said Maruti, which announced a record divided for the full year to March.
An increase in raw material prices and adverse foreign exchange movements pared some gains.
Maruti Suzuki’s operating margin narrowed to 14.2% in the March quarter from 15.6% in the year-ago period. The Japanese yen has strengthened against the dollar in the past three months. A strong yen makes imports from Japan costlier.
Maruti cautioned that its margins would come under further pressure when it starts buying cars from parent Suzuki Motor Corp’s (SMC’S) Gujarat factory under a contract manufacturing tie-up, which came into effect in the March quarter. During any expansion, fixed costs remain high until the company attains full capacity but start moderating as capacity utilisation improves. Suzuki’s plant in Gujarat has solved its Indian subsidiary’s capacity woes. Maruti will buy vehicles from Suzuki Motor Guj- arat at cost price. Maruti, which sells 15 models, currently pays royalty to SMC in Yen, except for Brezza.
“The Gujarat plant is addressing Maruti’s capacity constraints and the company has lined up new models over the next couple of years, which is likely to benefit the company going ahead,” said Shrikant Akolkar, an analyst at Angel Broking Ltd.
Maruti sold 414,439 units in the fourth quarter, an increase of 15% from a year ago. Of this, exports stood at 31,771 units.
Sales of passenger vehicles in India during the fiscal year ended March 31 crossed the 3 millionmark for the first time, growing at the fastest rate in six years, largely on the back of demand for sport utility vehicles. Maruti controls 48% of the Indian market.
Maruti, which has tasted success under current chief executive officer and MD Kenichi Ayukawa, is sitting on a cash reserve of ₹23,000 crore.
The company’s board recommended an annual dividend of ₹75 per share for 2016-17, more than double the ₹35 per share paid in the previous year.
Chairman RC Bhargava told reporters at a press conference that the company had modified its dividend policy and the payouts will be in the range of 18-40% as against 18-30% in the past.
Royalty outgo to parent Suzuki Motor, which owns 56% in Maruti, increased to 5.8% in March quarter as against 5.7% in the year earlier.
Maruti shares on Thursday declined 0.56% to close at ₹6,371.15 on the BSE, while the Sensex shed 0.34% to 30,029.74 points.