New Delhi: Maruti Suzuki India Ltd, the country’s largest car maker, reported its fourth consecutive drop in quarterly profit, setting the stage for a rough ending to what has been a brutal fiscal year for an industry grappling with a slowdown in sales.
Tightening credit and falling consumer demand in a slowing economy resulted in sales of cars contracting 12.5% to 264,064 units in the quarter to 31 December, according to lobby group Society of Indian Automobile Manufacturers.
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As a result, on Thursday, the auto maker, controlled by Japan’s Suzuki Motor Co., reported a 3.1% drop in revenue to Rs4,512.60 crore in the quarter ended 31 December, compared with Rs4,654 crore in the same period a year earlier.
Net profit fell steeply to Rs213.50 crore, down 54% from Rs467.60 crore a year ago.
Raw material costs were partly to blame, rising 7% to Rs3,451.20 crore even as the company sold fewer cars. Fluctuations in currency rates resulted in a Rs41 crore loss for the firm while depreciation rose 51% to Rs177.40 crore.
The results lagged analyst forecasts, but only just. A Mint poll of five analysts on 15 January had predicted a 47% drop in profit and a 4% decline in sales. Ramanth S., vice-president at IDFC-SSKI Securities Ltd, said, “The overall sentiment is very weak and the market will continue to decline in this quarter.”
Shares of Maruti closed the day up 4.67% to Rs544.80, but this had more to do with the markets cheering auto stocks over Wednesday’s cut in fuel prices. The Bombay Stock Exchange Sensex dropped 0.23%. The 14-share auto index had shed 33.48% in the last quarter while the Sensex fell 24.98%.
Thursday’s numbers indicate that Maruti will likely report lower profit this fiscal year than last, even if it scrapes ahead in revenue. In the nine months ended 31 December, revenue has grown at an anaemic 6.7% to Rs14,049 crore over a year- ago period, compared with a 22% expansion in the first three quarters of fiscal 2008 from the same period the year before. Profit, so far this year, has declined 46% to Rs975 crore.
“We wont see any respite in the fourth quarter as far as volumes are concerned,” said Anup Maheshwari, an analyst at KR Choksey Shares and Securities Pvt. Ltd. He estimates Maruti’s sales volumes will decline 6-8% this quarter even as it gains from falling commodity prices starting February.
Maruti’s top management hinted as much in a 2 January interview with Mint, when managing director and CEO Shinzo Nakanishi said, “Last (fiscal) year, we sold 711,000 units in India. I want to reach this number, however, I don’t know whether we can reach or not. Till today, (we’re) 3% down. So if we reach the said number—lucky.”
Maruti’s decline in volumes have been steeper than its peers in the quarter gone by. Sales at Hyundai Motor India Ltd fell 2.2% to 49,580 units in the last quarter and 6.6% to 35,038 units at Tata Motors Ltd. The Tata company reports results on Friday.