Maruti Suzuki profit falls for second straight quarter despite strong sales

New Delhi: Maruti Suzuki India Ltd’s profit fell for a second consecutive quarter in April-June as soaring commodity and logistics costs triggered by the West Asia conflict eroded margins, overshadowing robust growth in domestic sales and exports.

India’s largest carmaker posted a 9% year-on-year (y-o-y) decline in consolidated net profit to ₹3,447 crore, after a 6% drop in the preceding quarter.

The decline in profit came after a four-percentage-point contraction in operating Ebitda margin to 8.6%. Ebitda is short for earnings before interest, tax, depreciation and amortization.

The company said a temporary change in the payment cycle for certain commodities to support suppliers during the disruption also weighed on quarterly earnings.

“To support suppliers and ensure uninterrupted production, the company temporarily revised the settlement cycle for certain commodities such as aluminum, plastics, and rubber from a quarterly lag to a monthly lag basis,” Rahul Bharti, senior executive officer of corporate affairs at Maruti Suzuki India, said in an earnings call on Friday evening.

“This was a kind of extraordinary one-time measure taken in response to extraordinary circumstances,” Bharti said, adding that the temporary change in the settlement cycle adversely impacted profitability during the quarter.

Maruti joined Hyundai Motor India in facing pressure on profitability due to commodity price inflation after the Korean carmaker’s India unit reported a 35% fall in net profit to ₹889 crore on Thursday.

The country’s second largest carmaker Mahindra & Mahindra (M&M) also saw pressure from commodity inflation, but managed to post a 37% increase in net profit to ₹5,998 crore on the back of its other businesses like real estate, logistics and vehicle recycling and components.

While Maruti’s profitability suffered, revenue rose 36% to ₹52,470 crore on the back of strong sales growth in both domestic and international markets, despite concerns over disruption to exports.

According to its investor presentation on Friday, the company saw total sales grow 29% y-o-y to 682,724 units. Domestic sales grew 30% to 557,988 units, while exports grew 29% to 124,736 units.

Sales for M&M and Hyundai have also been in the green, with Hyundai being pulled back due to a fire at its suppliers production facility resulting in impact on production in June. M&M’s passenger vehicle sales surged 15% to 175,000 units while Hyundai’s domestic sales increased by 5% to 139,374 units.

“In simple terms, the company faced a double impact — from higher commodity prices and from an accelerated pass-through of these higher costs to our quarterly results. However, these measures enabled the company to maintain production continuity and meet customer demand without disruption,” Bharti explained.

The carmaker remained bullish on the outlook for the rest of the financial year.

“We had mentioned in the beginning of the year that this year most likely our sales would be constrained by the supply side rather than the demand side. The demand side seems to be healthy,” Bharti said.

“From our supply side perspective, we see a headroom of about 10% growth, but we have put up two plants. So along the way, we will see how much ramp-up of these two facilities we are able to do, and how much volumes we are able to generate from these two plants as well as the existing plants,” he added.

Since the start of the current financial year, Maruti has added 0.5 million units annual capacity across its Kharkhoda (in Haryana), and Hansalpur (Gujarat) plants, taking its overall annual capacity up to 2.9 million units as it looks to bank on growing supply to drive sales.

The bullish commentary on demand growth follows similar outlooks from M&M and Hyundai. Tata Motors Passenger Vehicle Ltd is yet to release its results for the April-June fiscal.

Maruti’s shares closed up 0.37% during trading hours on Friday as against 1.64% gain in Nifty Auto. The carmaker declared its results post trading hours.