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Maruti Suzuki India Limited on Thursday reported higher than expected profits for the first quarter of FY14, on back of higher export realisations, cost reduction, and benefits from merging Suzuki Powertrain India with itself.
India’s largest carmaker’s net profit for the three months ended June 30 shot up 49 per cent to Rs 632 crore from Rs 424 crore posted during the corresponding period of the last financial year.
“The increase (in net profit) was due to focused cost reduction efforts undertaken by the company, favourable foreign exchange rates and the benefit from the merger of Suzuki Powertrain India Ltd with the company last fiscal (FY13),” said Maruti Suzuki. During the quarter, the company’s net sales dipped by five per cent to Rs 9,995.34 crore due to sluggish sales. “Favourable foreign exchange rates during the quarter helped improve export realisation and limit the impact on net sales,” the company added.
Cost reduction efforts also helped the firm reduce overall expenses by 7.6 per cent to Rs 9,551.34 crore, which added on to the bottom line.
Arun Agarwal, auto analyst, Kotak Securities, said, “Maruti Suzuki reported Q1FY14 numbers in line with expectation. Revenues came in at Rs 102,373 mn, EBITDA margin was at 11.4% and net profit stood at Rs 6,316mn. Passenger car industry is going through a downturn and accordingly Maruti Suzuki witnessed volume de-growth in Q1FY14. Good monsoon and festive season are some near term positives for sales volumes. Higher discounts and INR depreciation could put some pressure on the EBITDA margin in 2HFY14.”
In Q1, while vehicles sales in the domestic market went down by 6.8% to 245,346 units, dropped by 35% to 21,088 units. The company, however, managed to retain its share in the domestic market as the fall was in line with the industry. Ajay Seth, chief financial officer, MSIL said the company would have to increase efforts to attract customers.
During the quarter, the average discount across the models was Rs 13,446 as against Rs 11,646 in the year ago period. Seth informed going forward "there will be significant increase in the discounts offered on cars. We should prepare for that. Discounts of diesels cars have gone up because diesel engine sales are declining and discount on diesel cars is impacting margins".
Shares of Maruti Suzuki were trading at Rs 1,414.20 a piece, down 0.12% from the previous close on the Bombay Stock Exchange (BSE).
