Maruti Net Falls on Jat Stir, Higher Ad Spend

Profit slips for the first time in two years in Q4 to .₹ 1,133.6 crore, a de­cline of 11.7%

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

New Delhi: Maruti Suzuki on Tues­day re­ported a drop in quar­terly profit for the first time in two years, as higher spend­ing on ad­ver­tis­ing, loss of pro­duc­tion due to a civil un­rest in Haryana where its fac­to­ries are lo­cated and a change in ac­count­ing rules weighed.

Net profit at the na­tion’s largest car maker fell 11.7% for the fourth quar­ter ended March 31 to .₹ 1,133.6 crore. An­a­lysts, on av­er­age, had ex­pected .₹ 1,130 crore, ac­cord­ing to Thom­son Reuters. Net sales rose 12.5% to .₹ 14,929.5 crore. In a news re­lease, the com­pany said it suf­fered a pro­duc­tion loss of more than 10,000 ve­hi­cles, be­cause of the Jat ag­i­ta­tion in Fe­bru­ary seek­ing reser­va­tion for the com­mu­nity. The com­pany had to halt man­u­fac­tur­ing for days, with pro­tes­tors block­ing roads.

Chief fi­nan­cial of­fi­cer Ajay Seth said the change in ac­count­ing rules re­sulted in a drop in non-core in­come. Earn­ings of .₹ 200-300 crore from mu­tual funds in­vest­ment, which were pre­vi­ously ac­counted for ev­ery quar­ter, will now be cal­cu­lated cu­mu­la­tively ev­ery three years.

Maruti Suzuki’s to­tal ve­hi­cle sales in the past quar­ter rose 3.9% to 360,402 units. Op­er­at­ing profit mar­gin at 15.4% bet­tered an­a­lyst es­ti­mates of 14.6-14.8%. An­a­lysts had ex­pected op­er­at­ing mar­gins of the com­pany to be un­der pres­sure, with the Ja­panese yen strength­en­ing against the dol­lar.

Maruti Suzuki pays roy­alty to par­ent Suzuki Mo­tor in yen for its ear­lier mod­els.

ON GROWTH

“The net profit was slightly be­low ex­pec­ta­tions on ac­count of lower other in­come and higher tax in­ci­dence,” said Ma­hantesh Sabarad, deputy vice-pres­i­dent at SBICAP. “The op­er­at­ing per­for­mance came in as a sur­prise. Even on the higher side, we had es­ti­mated 15.2%. The im­prove­ment in Ebitda mar­gins over Q3 was on ac­count of stock change ef­fect.”

While quar­terly profit fell, Maruti Suzuki re­ported its high­est-ever an­nual profit of .₹ 4,571.4 crore, up 23.2% from the year be­fore.

Shares of Maruti Suzuki closed 3.6% higher at .₹ 3,869.45 on the Bom­bay Stock Ex­change, out­pac­ing the bench­mark Sen­sex that rose 1.3%. Given the strong de­mand for new launches, pre­mium hatch­back Baleno and com­pact sports util­ity ve­hi­cle Brezza, Maruti is tar­get­ing dou­ble-digit growth in the cur­rent fis­cal year. It has planned for pro­duc­tion of 1.57-1.58 mil­lion units in the year that be­gan on April 1.

It is bud­get­ing for a cap­i­tal ex­pen­di­ture of .₹ 4,400 crore this fis­cal year, com­pared with .₹ 2,500 crore last year, Chair­man RC Bhar­gava said. “The re­sources will be utilised in do­ing R&D work and in set­ting up sales and mar­ket­ing in­fras­truc­ture.” While the com­pany is es­ti­mat­ing strong growth, Bhar­gava said the year is ex­pected to be chal­leng­ing on many counts, with for­eign ex­change move­ments look­ing less favourable and com­mod­ity prices ris­ing. The au­to­mo­bile in­dus­try in In­dia is also strug­gling af­ter the govern­ment im­posed an in­fras­truc­ture cess of 1-4% on ve­hi­cles and ef­forts by au­thor­i­ties to dis­cour­age the use of diesel ve­hi­cles.

Maruti ex­pects ru­ral sales to go up this fis­cal year, as rains are fore­cast to be bet­ter this mon­soon af­ter two years of drought.

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