The country’s largest car maker Maruti Suzuki India Limited on January 25 reported a standalone net profit of Rs 1,011 crore for the third quarter ended last December, down 48 percent from Rs 1,941 crore, it reported a year ago. The company’s net profit stood at Rs 475 crore in the previous quarter.
Standalone revenues for the Gurgaon-based carmaker stood at Rs 23,246 crore, down 1 percent, compared to Rs 23,458 crore reported in a year back. The preceding quarter saw the topline at Rs 20,538 crore.
Volumes
The company recorded a sales volume of 430,668 units during the quarter under review. This was 13 percent lower than 495,897 units it sold in the same period last year.
The dent in Maruti Suzuki figures reflect a general slowdown in the automobile industry triggered by a global shortage in the supply of electronic components. The component crisis pruned the output from the Maruti stable by 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 the third quarter last year.
Exports, however, brought some solace for the company with a record 64,995 units shipped abroad during the quarter as against 28,528 units a year back. “The exports were 66 percent higher than the previous peak exports in any Q3,” the company said in a statement.
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 snag in electronic components
The supply chain constraint related to electronic 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 continued to impact the margins for the company during the period under review.
The cost of materials as a 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 rationalisation 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 a 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 key reasons for margin movement were adverse commodity prices, lower sales volume due to electronic component shortage, and lower non-operating income,” the company said. The cost reduction efforts undertaken by the company and increased selling prices provided some cushion to the decline in margins, it said.
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, in turn, 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.
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