Takes a hit from higher input costs, royalty payments and currency valuations.
Maruti Suzuki India today reported a 4.95 per cent rise in its second-quarter net profit at Rs 598.2 crore, compared to Rs 570 crore a year earlier, on the back of record auto sales.
The country’s largest car manufacturer, however, admitted profit margins were under pressure during the three months to September due to increase in commodity prices, higher royalty payments and currency volatility.
Maruti Suzuki India’s Managing Director and CEO, Shinzo Nakanishi, said, “In the second quarter, our sales grew 32.93 per cent in the domestic market, due to the successful launch of new as well as refreshed models. The momentum should continue in the second half, but last year’s base effect should be kept in mind.”
Between July and September, the company launched the 1,000cc version of its best-selling car, Alto. It also introduced factory-fitted CNG variants of Alto, Estilo, WagonR, Eeco and SX4, along with an automatic version of A-Star. It sold 27.4 per cent more vehicles at 313,654 units, compared to 283,324 units last year.
Total income from operations rose 26.98 per cent to Rs 9,147.27 crore from Rs 7,203.84 crore. However, Ebitda (earnings before interest, taxes, depreciation and amortisation) margins fell to 10.7 per cent from 13 per cent.
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“In the second quarter, steel prices went up by 10 per cent. Besides, royalty payments increased to 5.3 per cent of net sales, compared to 3.7 per cent in the corresponding quarter last financial year, due to the appreciating yen. This had an impact on our margins,” said Chief Financial Officer Ajay Seth.
It doled out Rs 471.6 crore for royalty payments to the parent company, Suzuki Motor Corporation, compared to Rs 257.9 crore last year. The cost of consumption of raw materials and components went up to Rs 6,938.88 crore from Rs 5,254.89 crore.
On the exports front, the company will continue to focus on non-European markets. “Markets in Europe continue to be dull, with the scrappage scheme coming to an end. We will focus on non-European markets to match our last year’s export levels. Sixty per cent of our total exports came from these markets, compared with 20 per cent last year,” Nakanishi said. In 2009-10, it exported 140,000 units.
The company has no plan to raise prices to meet the increase in commodity prices. “We are working on absorbing the rise in input costs internally by improving efficiency. There are no plans to hike prices as of now,” said Mayank Pareek, managing executive officer (marketing and sales).