Maruti Suzuki’s performance for the quarter ended June is in many ways a repeat of the January-March quarter. Factors such as a revival in volume growth and improved sales mix which helped top-line growth then, have come to its aid this time too.
A five per cent growth in domestic volumes coupled with improved realisations from diesel vehicles (25-30 per cent of total volumes) contributed to the 27.5 per cent increase in net sales to Rs 10,529 crore.
However, similar to last time, operating margins have disappointed at 7.3 per cent against 9.5 per cent a year ago. This is despite a drop in raw materials to sales percentage from about 78 per cent to 76 per cent. As royalty payments to the parent and payments to vendors are made in yen, currency fluctuations have curtailed margins. This squeeze along with higher interest costs and lower other income has resulted in net profits plunging by 23 per cent to Rs 423 crore.
Going forward, even amidst the prevailing slowdown, few positives exist for passenger vehicle makers. For one, car sales, which was among the first to moderate last year has seen a revival in the last few months. Two, with the uncertainty on taxing of diesel vehicles cleared, these have been more in demand due to the widening gap between petrol and diesel prices. Three, utility vehicles continue to see strong sales, proving to be a good diversifier.
But for Maruti, the Manesar closure has taken the wind out of its sails. An indefinite lock-out at Manesar implies that production has now been halted. Even if raw material costs and currency stabilises in this quarter, shrinkage in volumes will again pull down growth.
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