NEW DELHI: India’s largest carmaker Maruti Suzuki on Tuesday reported a net profit of Rs 1,011 crore, down 48 per cent year-on-year (YoY) against a profit of Rs 1,941.4 crore in the same quarter last year.The company’s net profit stood at of Rs 475 crore in the previous quarter.
Standalone revenues for the Gurgaon-based carmaker stood at Rs 23,246 crore, down by 1 percent, compared to Rs 23,458 crore reported in the year-ago period. Revenues in the preceding quarter were Rs 20,538 crore.
The volumes for the company during the quarter stood at a total of 430,668 units, 13 percent lower than 495,897 units sold in the same period, a year ago.
The automobile industry continues to be constrained by a global shortage in the supply of electronic components. Because of this shortage of components, the company was not able to produce an estimated 90,000 vehicles.
The sales volume in the domestic market was down 22 percent on year to 365,673 units compared to 467,369 units in third quarter of last year.
The exports brought some consolation for the company as the company was able to register highest ever exports of 64,995 units during the quarter compared to 28,528 units in the same period a year ago.
“The exports were 66 percent higher than the previous peak exports in any Q3”, said the company.
The company is not facing any paucity of demand which can be gauged from the fact that the pending customer orders at the end of the quarter stood at 240,000 units.
Supply constraint of electronic components
The supply chain constraint related to electronics components is seen improving gradually which would aid the production in the fourth quarter, though the company still doesn’t expect it to reach full capacity.
Costs and Margins
Despite cost reduction efforts, due to lower sales volume, higher commodity prices continue to impact the margins of the company.
The cost of materials as percentage of sales was higher by 240 bps on year at 78.8 percent while employee costs increased marginally by 10 bps to 4.4 percent.
The rationalization of costs enabled the company reduce its other expenses for the quarter by 20 bps to 14.6 percent for the quarter.
The operating income for the quarter was lower by 70 bps as percentage of sales at 4.8 percent compared to 5.5 percent in the same period a year ago.
The higher operating costs resulted in the operating EBIT (earnings before interest and tax) margins for the quarter declining sharply by 260 at 4.1 percent while the net margins declined even further by 401 bps to 4.6 percent compared to 8.7 percent a year ago.
The management said that, “The key reasons for margin movement were adverse commodity prices, lower sales volume due to electronic component shortage, lower non-operating income”. The cost reduction efforts undertaken by the company and increased selling prices provided some cushion to the decline in margins, it added.
The company continues to face supply-side issues which impacted the production, resulted in a decline in volumes on year. The price rises effected by the company during the quarter were negated by higher input costs which impacted the margins.
The stock markets cheered the results of Maruti on the hope of easing of supply side constraints coupled with strong demand backed by pending orders.
The stock closed the day at Rs 8,603, up Rs 550 (+6.8 percent) from its previous close on the National Stock Exchange on January 25. It has generated returns of 7.8 percent in the past one year. During the past one month, the stock has climbed 17.6 percent.