Maruti Suzuki Q4 Results: Profit Falls, Margin Narrows As Sales Drop 16%

Maruti Suzuki India Ltd.’s quarterly profit fell as sales tumbled after the coronavirus pandemic stalled operations, disrupting a nascent recovery from the worst auto slowdown in decades.

Net profit of India’s biggest carmaker declined 28 percent year-on-year to Rs 1,291.7 crore in the January-March quarter, according to an exchange filing. That compares with the Rs 1,237-crore consensus estimate of analysts tracked by Bloomberg.

The company’s revenue fell 15 percent year-on-year to Rs 18,198.7 crore, against an estimated Rs 18,335 crore. That mostly came on the back of a 16 percent drop in sales during the quarter. The novel virus outbreak had forced the company to cut production by 5.38 percent in February when India still had a handful of cases.

Besides, the company spent more on promotions during the quarter to boost sales, which hurt margin, it said in a press statement. That, however, was partially offset by lower operating expenses, cost cuts, higher fair value gains on invested surplus and a lower corporate tax rate.

The carmaker’s operating profit fell 32 percent over last year to Rs 1,546.4 crore. Its margin narrowed 2 percentage points to 8.5 percent.

Virus Adds To Woes

India’s automakers are facing a trifecta of troubles. First, an increased upfront insurance cost, coupled with a broader consumption slowdown, hurt sales. While deep discounts helped cushion sales a bit during the festival season and in December, both retail sales, measured by registrations, and wholesales tumbled in the last four months due to disruption caused by BS-VI emission norms. And then a nationwide lockdown to combat the Covid-19 pandemic stalled operations at companies and dealerships.

Maruti Suzuki had suspended production since March 22 — a couple of days before India imposed the world’s stringent stay-at-home restrictions. A month later Haryana allowed production on a single-shift basis at the company’s Manesar plant. But Chairman RC Bhargava said, “We will start operations whenever we can maintain continuous production and sell (vehicles), which is not possible at this point of time.”

By the first week of May, the carmaker had reopened 600 dealerships and beefed up its online booking. The Manesar plant started production on May 12.

Shares of Maruti Suzuki were trading 1.4 percent higher after the results were announced, while the benchmark BSE Sensex was up 2.08 percent.