Maruti Suzuki, the country's largest manufacturer of passenger vehicles, has said its net profit has dipped by 54.27 per cent to Rs 213.57 crore for the quarter ended December 2008. The net profit for the same period last year stood at Rs 467.04 crore. The third quarter net profit dip is the lowest in the last four years.
The company's turnover for the quarter was flat at Rs 4,625.81 crore. In the same three-month period last year, the turnover was Rs 4,759.43 crore.
The dip in profit, according to the car major, was due to the fall in sales, rise in raw material costs, adverse impact of a strengthening Japanese yen against the domestic rupee, and an accelerated depreciation accounting practice.
Operating profit margins for the quarter ended December stood at 6.4 per cent against the 16 per cent for the same period a year ago.
"Although net profit for Maruti at about Rs 213 crore is in line with our expectations, turnover has been flat mainly due to the employee costs, foreign currency losses of about Rs 40 crore, excise duty expenses of around Rs 55 crore in the third quarter," says Vaishali Jajoo, auto analyst at Angel Broking.
Although Vaishali expects no significant improvement in profit realisations in the fourth quarter of FY 2009, she maintains a "buy" on the Maruti Suzuki stock with a target price of Rs 600 with a one-year horizon.
Despite December sales providing a booster shot in the sales for Maruti Suzuki, the total number of units sold in the domestic market for the October–December quarter stood at 158, 860, a dip of 16 per cent when compared to the 187,875 units sold in the same period a year ago.
Exports inched marginally with the commencement of the car major's strategic model--the A-Star--to Europe in December. About 70 per cent of passenger sales purchases are financed. With banks getting increasingly jittery following the Supreme Court's norms on vehicle repossession in case of loan defaults, around 10-15 per cent of car buyers have been turned away at the initial credit quality check itself, industry sources said.
The auto maker hired new employees in the third quarter in order to strengthen its R&D. "In other expenditures, ocean freight had increased by Rs 18 crore, and advertising expenses by Rs 10 crore for the third quarter," says Ajay Seth, chief financial officer, Maruti Suzuki.
Seth says the strengthening yen is another concern on the company's exports and imports of auto component.
The Maruti stock gained 4.67 per cent to close at Rs 520.50 on BSE on Thursday
