Mumbai: Adverse currency movement coupled with higher discount on its petrol models singed net profit at Indian car market leader, Maruti Suzuki India Ltd by 3% in the fourth quarter ended March 2012. This was even as the company’s total volume expanded 4.9% to 360,334 units boosting the revenue 17% to Rs 114,86.4 crore.
Maruti, has had a year to forget after labour strikes and an industry-wide demand slowdown hit sales and dragged down profits as rising input prices and a weaker rupee increased costs.
In an earnings call with analysts post the results, Shinzo Nakanishi, chief executive officer at the firm said, “there has been some positive developments in the beginning of the current fiscal in the form of policy rate cut by the Reserve Bank of India. This may help to improve customer sentiments. However, fuel prices continue to be an area of concern.” Ajay Seth, chief financial officer at Maruti said, “the erosion in company’s margins would have been deeper had it not been for the cost reduction measures.”
Meanwhile, with a view to add new models and expand diesel engine capacity, Maruti plans to pump in Rs 3,000 crore in the current fiscal against Rs 2,700 crore it invested last fiscal. Of this, close to Rs 500 crore has been earmarked for research and development.
The carmaker which introduced its Ertiga multi-utility vehicle on 12 April has received bookings of 22,000 units. “This may earn higher margins from the vehicle as it shares a platform and components with Swift and Dzire models,” according to Umesh Karne, an analyst at Brics Securities Ltd. in Mumbai. “Record sales are propelling profit at Maruti as demand increases for higher margin products such as the Swift and also more expensive diesel models,” said Karne. “We see a slow and steady increase in demand as interest rates come down and consumer sentiment improves,” he added.
The company’s board, which met on Saturday, recommended a dividend of 150% (Rs 7 per share of face value Rs 5 each) for 2011-12. The dividend in 2010-11 was also at the same level.
Bloomberg and Reuters contributed to this story.
