Maruti Suzuki profit triples after last year’s shutdown

Tuesday, 29 October 2013 00:41 - - {{hitsCtrl.values.hits}}

Reuters: India’s biggest carmaker Maruti Suzuki beat analyst estimates by nearly tripling its quarterly net profit, flattered by a low base last year and helped by cost cuts and positive currency movements. Maruti Suzuki India Ltd, like rivals Tata Motors Ltd and Mahindra and Mahindra Ltd, has been cutting costs during a second year of falling sales linked to high inflation and meagre urban wage hikes in a slowing economy. But rural incomes are likely to rise thanks to bumper harvests after strong monsoons, and could be spent on vehicles in the year-end festive season when Indians traditionally buy expensive goods. Maruti is well placed to gain because of a wide dealership network, analysts say. The company, controlled by Japan’s Suzuki Motor Corp, made a third of its April-to-June sales in rural areas. Net profit in the July-to-September quarter was 6.7 billion rupees ($109 million), up from 2.27 billion a year earlier when a breakdown in labour relations at the Manesar factory led to one death, over 100 injuries, a month-long shutdown and a $250 million production loss. Earnings had a boost from the inclusion of a recent merger with engine production business Suzuki Powertrain India Ltd. Revenue rose 27% to 102.12 billion rupees versus a 101.25 billion rupee estimate, Maruti Suzuki said in a statement on Monday. Its operating margin widened to 12.6% from 11.4% in the previous quarter. “Higher localization and cost reduction initiatives by the company also contributed significantly to bottomline growth during Q2. The overall impact of foreign exchange was positive during the quarter,” Maruti said in a statement. Maruti is the first of India’s three biggest domestic carmakers to report second-quarter earnings. Analysts estimate that profit fell 2% at Mahindra and Mahindra, India’s biggest utility vehicle manufacturer, and rose 22% at Tata Motors, India’s largest automaker by revenue, helped by strong sales at its luxury unit Jaguar Land Rover.

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