Maruti Suzuki’s sales volume in the quarter grew at a higher rate than most industry players. The company sold 341,329 vehicles during the quarter, registering a growth of 13.8 per cent, year-on-year. Domestic sales grew 13 per cent to 305,694 vehicles and exports grew 22 per cent to 35,635 vehicles.
The company’s management is confident of posting double-digit volume growth in the current financial year, despite challenges faced by rural and semi-urban areas due to a projected deficit in monsoon rainfall.
During the quarter, Maruti Suzuki’s operating margin, a key measure of profitability, expanded 462 basis points (a basis point is a hundredth of a percentage point), year-on-year, and 42 basis points, quarter-on-quarter, to 16.3 per cent. The margin would have been higher at 16.9 per cent were it not for a one-time asset impairment.
The company has also benefited from lower raw material costs and localisation. Raw materials as a percentage of sales have declined to 67.4 per cent in the June quarter from 72 per cent in the corresponding quarter of the previous year. Employee costs, too, are down along with other expenses. Lower promotions and discounts helped improve profitability.
“The operating profit is in line with our expectations even though the reported profit is lower than expectations, due to a reduction in other income and a higher tax outgo,” said Jinesh Gandhi, senior vice-president (research) at Motilal Oswal.
Maruti Suzuki’s other income fell 28 per cent to Rs 172 crore and tax expense almost doubled to Rs 477.6 crore. The cost of raw materials consumed went up six per cent to Rs 8,182 crore.
A weaker yen improved the company’s profitability. Maruti Suzuki has a significant exposure to the yen by way of imports, both direct and indirect, and royalty payments to its parent Suzuki Motor, Japan. The company imports about 15 per cent of its raw materials and pays a royalty of 5.5 per cent on sales.
Reference - http://www.business-standard.com/article/companies/maruti-suzuki-net-jumps-56-to-rs-1-192-cr-in-q1-115072800498_1.html