Q2 Results: Maruti Suzuki’s Profit Declines For The First Time In Four Years

Maruti Suzuki India Ltd.’s quarterly profit declined for the first time in more than four years because of higher commodity costs and a weaker rupee.

The country’s largest automaker reported a net profit of Rs 2,240.4 crore in the July-September period, a decline of 10 percent from the year-ago period, according to its stock exchange filing. That was, however, higher than the Rs 2,023-crore consensus estimate of analysts surveyed by Bloomberg.

Revenue rose 3 percent year-on-year to Rs 22,433 crore. The analysts had forecast Rs 22,241 crore. The delayed festive season sales impacted the company's top line.

Maruti Suzuki sold 4.84 lakh units in the September quarter, a decline of 1.5 percent from the year-ago period. Its exports slumped 15 percent on a yearly basis to 29,448 units.

“Rising crude oil and fuel prices impacted sales,” Maruti Suzuki Chairman RC Bhargava said in a post-earnings press conference, adding that volumes were also weighed by the higher upfront insurance payment of nearly Rs 9,000 on an average. “We will continue to make efforts to deliver a volume growth of 10 percent on a yearly basis.”

Operating income or the earnings before interest, tax, depreciation and amortisation fell 7 percent on a yearly basis to Rs 3,431 crore during the quarter—the consensus estimate was Rs 3,204 crore. The company’s operating margin contracted to 15.3 percent from 16.9 percent—analysts had forecast 14.4 percent.

“The operating profit was impacted due to the increase in commodity prices, adverse foreign exchange movement and higher sales promotion expenses partially offset by cost reduction efforts,” the company said.

Still, according to Ankit Merchant, research analyst at SMC Global Securities, the operating margin was ahead of estimates. “The material costs declined by 20 basis points on a yearly basis and the realisations have also been strong,” he told BloombergQuint in an interaction. Merchant is looking forward for the December quarter on how the festive season pans out.

Shares of Maruti Suzuki fluctuated between gains and losses to trade 0.3 percent lower after the results were announced compared with a 0.9 percent fall in the NSE Nifty Auto Index.