Maruti Suzuki Q1 net profit dips 32% at Rs 1,377 cr on lower sales volume, higher depreciation expenses

New Delhi: The country's largest carmaker Maruti Suzuki India (MSI) on Friday reported 31.67 percent decline in consolidated net profit at Rs 1,376.8 crore for the first quarter ended 30 June, on account of lower sales volume and higher depreciation expenses.

The company, which posted a net profit of Rs 2,015.1 crore in April-June period 2018-19, said in the next three years it will completely shift to paying a royalty to parent Suzuki Motor Corp in rupees instead of yen.

It said revenue from the sale of products during the first quarter this fiscal stood at Rs 18,738.8 crore as compared to Rs 21,813.8 crore earlier, down 14 percent.

Depreciation and amortisation expenses during the first quarter stood at Rs 919 crore as compared with Rs 720.3 crore in the year-ago period.

 Maruti Suzuki Q1 net profit dips 32% at Rs 1,377 cr on lower sales volume, higher depreciation expenses

Representational image. Reuters.

The company sold a total of 4,02,594 vehicles during the quarter, lower by 17.9 percent from the year-ago period. Sales in the domestic market stood at 3,74,481 units, down 19.3 percent. Exports were at 28,113 units.

MSI CFO Ajay Seth said during the first quarter the company was also affected by the ongoing slowdown in the domestic automobile industry.

"It was the fourth consecutive quarter of decline in volumes (for the industry). During the quarter, passenger vehicles (PV) sales of the industry declined 18 percent...The company was also impacted by the demand weakness and domestic sales declined by 19.3 percent," Seth told analysts.

He, however, said the current situation is a cyclical phenomenon and MSI continues to believe in the long-term potential of the market.

Elaborating on the challenges in the market, MSI Senior Executive Director (Marketing and Sales) R S Kalsi said the rural market, which was earlier witnessing good traction, is also under a lot of pressure and saw a decline of around 17 percent.

The decline in the rural market was almost similar to what has happened in the urban market, he said adding footfalls at showrooms continued to witness a big decline.

Commenting on royalty payment to parent Suzuki, Seth said at present royalty on almost 45 percent of the models are now being paid in rupee and the remaining 55 percent will also transition fully from yen to rupee in the next three years.

"So, by 2021-22 we would have all the models, which would have moved to the rupee formula," he said, adding for the first quarter of the fiscal the royalty payment was at 5.2 percent of net sales.

In 2015, MSI had announced that it would start paying a royalty to its parent Suzuki in rupee instead of yen for all new models starting with the Vitara Brezza which was launched in 2016.

Earlier, company's Chairman R C Bhargava had said that the royalty of all the models of Maruti was expected to be in rupee terms by 2025.

When asked about BS-VI preparedness, Kalsi said the company is working keeping in mind the April 2020 deadline.

"Majority of our models will be ready by end of 2019," he said.

At present, five of the company's top-selling models are BS-VI compliant. These are Alto, WagonR, Swift, Dzire and Baleno.

Commenting on the market shift towards petrol engines ahead of BS-VI implementation, Seth said petrol vehicles account for 66 percent of the domestic PV industry in the first quarter.

"For the company, the contribution of petrol increased further from 72 percent in the first quarter of last fiscal to 78 percent in the first quarter of this fiscal," he added.

Shares of Maruti Suzuki ended the day at Rs 5805.55 apiece, up 0.78 percent from the previous close on BSE.

Updated Date: Jul 26, 2019 19:48:56 IST