Maruti Q4 net profit up 39.1% at Rs 360 cr

Despite single-digit sales growth, higher raw material costs & drop in exports.

Stringent measures to cut costs and boost productivity, initiated five years ago, helped market leader Maruti Udyog post a net profit growth of almost 40 per cent for January-March 2006, even as it set a target of double-digit sales growth in 2006-07.

"We are aiming at double digit growth in sales for 2006-07," Maruti Udyog Managing Director Jagdish Khattar said at a press conference in the Capital.

The government cut the excise duty on small cars from 24 per cent to 16 per cent in February, leading to a spurt in sales in March. The momentum is expected to continue in the current financial year.

Khattar added rising raw-material prices could affect component prices during the year.

However, as the company's product mix has moved towards more expensive cars, its raw material cost to net sales ratio has declined. Since it incurred a loss of Rs 269 crore in 2000-01, the company has been very conscious of its bottomline.

The company reported a net profit of Rs 360.92 crore for January-March 2006, an improvement of 39.11 per cent over the corresponding quarter of the previous year, inspite of a one-time expense of Rs 34.92 crore in the last quarter to support dealers, following the reduction in the excise duty on small cars in Budget 2006.

The compensation was made against the stock of cars held by dealers on the Budget day.

The rise in the total income (net of excise) for the quarter was 8.04 per cent to Rs 3392.27 crore. The Maruti stock rose to Rs 923.45 on the Bombay Stock Exchange today compared with yesterday's close of Rs 867.50.

Majority-owned by Suzuki Motor Corporation of Japan, Maruti contributes around ten per cent of its parent's revenue but close to a quarter of its profits.

The company is investing a total of Rs 1,391 crore this financial year, a part of which will be in a new car plant. On the cards is a compact car to be launched in 2008-09, through which the company will seek to boost its exports. The plan is to export about 100,000 units of this car every year.

The fresh investment will most likely increase the interest and depreciation costs, which will affect the bottom line to an extent.

Maruti's board also approved a price of Rs 100 per share for purchase of parent Suzuki Motor Corporation's 1,200,000 shares -- 30 per cent equity -- in their joint venture, Maruti Suzuki Automobile India Limited.

The price being paid is the face value of the shares. When the deal was announced earlier this month, there was speculation that Maruti might end up paying a hefty premium.

For the full year 2005-06, Maruti registered a total income of Rs 124,81.43 crore (net of excise), a 10 per cent growth over 2004-05.The net profit increased 39.29 per cent to Rs 11,89.05 crore.

The bottom line was also shored up by a steep fall in full year depreciation by 38 per cent to Rs 285.42 crore and in interest cost by 43 per cent to Rs 20 crore.

The company's board has recommended a dividend of 70 per cent, against 40 per cent declared for the previous fiscal.