Q3 Results: Maruti Suzuki’s Profit Falls On Weaker Demand, Higher Costs
Maruti Suzuki India Ltd. reported lower-than-expected quarterly profit because of higher commodity prices, currency fluctuation and weaker demand.
Net profit fell 17 percent year-on-year to Rs 1,489 crore in the October-December period, India’s largest automaker said in an exchange filing. That compares with the Rs 1,695 crore consensus estimate of analysts tracked by Bloomberg.
Revenue, however, rose 2 percent to Rs 19,668 crore, in line with analysts’ estimate of Rs 19,600 crore.
Automobile sales growth has slowed and demand remained subdued during the festival season last year because of higher fuel prices and increased upfront insurance costs. Most companies offered year-end discounts but that didn’t help and inventory piled up.
For Maruti Suzuki, passenger vehicle exports declined 8.5 percent year-on-year in the quarter ended December, hurt by the weakness in global markets and devaluation of most currencies against the dollar, it said in an exchange filing. Chief Financial Officer Ajay Seth said festive were also below expectations.
Operating income, or the earnings before interest, tax, depreciation and amortisation fell 36 percent on a yearly basis to Rs 1,930 crore during the quarter—the consensus estimate was Rs 2,620 crore. The company’s operating margin contracted for the fourth straight quarter to 9.8 percent from 15.7 percent. Analysts, however, expected margin at 13.4 percent.
“Single-digit Ebitda margin for Maruti is something which is certainly very very disappointing,” IIFL Securities’ Aditya Bapat told BloombergQuint. Weak demand and higher discounts dragged down the company’s earnings.
The company last month decided to increase prices of its vehicles across various models to offset adverse impact of an increase in commodity prices and foreign exchange rates.
Shares of the carmaker fell as much as 9 percent, its biggest single-day decline in 18 months. That compared with a down 0.7 percent decline in the Nifty 50 Index as of 3 p.m.