Maruti Suzuki Profit Misses Estimate as Costs Squeeze Margins
New Delhi: Maruti Suzuki India Ltd. reported lower-than-expected quarterly profit, as rising input costs weighed on profitability at India’s largest carmaker.
Net income declined 27% to ₹2,410 crore for the three months ended 30 September, according to an exchange filing on Tuesday. That fell short of the ₹2,929 crore average of analyst estimates compiled by Bloomberg. Revenue at the Indian unit of Suzuki Motor Corp. rose 26% to ₹53,340 crore during the period but also trailed estimates. Total costs jumped 30% to ₹50,600 crore, with raw material costs surging 48% from the same quarter last year.
The result suggests that pressure from raw-material costs, a less favourable product mix and higher depreciation from new capacity additions outweighed benefits from a stronger vehicle demand. Earnings before interest and taxes, or EBIT, margin came at 5.5%, down from 8.4% from a year ago.
Investors and brokerages will be monitoring if the recent price increases and a richer mix of SUVs can help support margins in coming quarters. Discretionary spending in the world’s most-populous nation is also expected to face a squeeze in the near future after India’s inflation accelerated to an almost two-year high last month.
“Higher new-car prices from rising input costs and weak rainfall in agricultural areas remain risks,” for Indian carmakers, Tatsuo Yoshida, a Bloomberg Intelligence analyst wrote in a 23 October note.
Sales momentum remained strong entering India’s festival season. The carmaker saw small car sales increasing 35.9% in the September quarter and SUV sales by 68.2% with demand continuing to outpace supply, boosting Maruti Suzuki’s market share to 40.8%.
The recovery in small-car sales following changes to India’s goods and services tax structure last year has supported demand, although a shift toward lower-priced models weighed on realisations.
Maruti Suzuki undertook two rounds of price increases in the reporting quarter citing continuous and sustained increases in input costs—a step it said last month was taken after absorbing costs through internal cost reduction measures for months.
Adverse commodity prices due to the Middle East conflict, currency movements and mark-to-market losses on invested surplus were some “negative factors” that dragged down the margins in this quarter, according to a company presentation.
Maruti’s shares have slipped 31.4% this year, outpacing the 13.6% fall in the benchmark S&P BSE Sensex.
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