Image By: Amit Verma
Maruti Suzuki, India’s largest car maker, on Friday fell short of analysts' expectations by reporting net profit of Rs 1,882 crore, 10 percent higher than in the same quarter a year ago, as higher effective tax hurt the company.
Analysts polled by Reuters had estimated the car maker to post a net profit of Rs 2,243 crore for the quarter under review.
Net sales grew by 0.83 percent to Rs 20,594 crore during the reporting quarter as compared to Rs 20,423 crore posted by it in the same quarter last year. The company's operating profit margin expanded 20 basis points over the same period to 14.2 percent.
"Increase in effective tax rates and lower non-operating income due to mark-to-market impact on the invested surplus, compared to last year impacted net profit," the company said in a statement.
Other non-operating income during the reported quarter was Rs 595 crore, as against Rs 449 crore in the same period a year ago.
"Commodity costs have gone up. Royalty for the year has come down to 5.4 percent from 5.8 percent although in the last quarter the royalty was hit because of Yen becoming stronger that led to impact on margins. In the same quarter the employee cost has shown an increase. The variable pay which we include every quarter used to be Rs 300 crore in the last quarter it went to Rs 400 crore. Gratuity provision has been changed which has led to Rs 30 crore provision," said R C Bhargava, Chairman, Maruti Suzuki India.
The Delhi-based company, whose shares have outperformed the BSE Sensex sharply over the past year, has seen a robust demand for almost all of its new models including Vitara Brezza, Dzire, Baleno and Swift. Its market share has risen to 50 percent, 270 basis points higher than at the end of last year.
However, revenue from sale of vehicles remained largely flat, owing to the large contribution of Alto, the single largest low-ticket model in Maruti’s stable. The company's second biggest contributor to revenue -- the Dzire -- also saw its price being cut, when compared to its previous avatar, leading to lower revenue.
“The top line and volume were good and realisations have come up well. But below that there are multiple factors which have led to below than expected net profit. Royalty and raw material has gone up while tax outgo has increased may be because of the Gujarat plant ramp up. Finance cost has also gone up," Ashwin Patil of LKP Securities told CNBC TV18.
The company sold a total of 4.61 lakh vehicles during the quarter, 11.4 percent higher than in the same period last year. Sales in the domestic market stood at 4.27 lakh units, 11.6 percent higher year on year, while exports came in at 34,691 units.
Maruti Suzuki has also proposed a dividend of Rs 80 per share for FY18, compared to Rs 75 per share declared last year. This is would make the dividend payout ratio slightly higher than that of FY17.
The board of directors has agreed to set up two funds to mark the 35-year anniversary of the company. One of them will be an employee welfare fund, which will deal with health, education and infrastructure, and housing colonies.
The details of the fund are yet to be worked out but it has been announced that each year, it will receive one percent of the company's net profit.
At 14:17 IST, Maruti's shares were down 1.85 percent at Rs 8,785.00, compared with a 0.8 percent rise in the Sensex. The article first appeared here