Maruti Suzuki’s profit again missed analysts’ estimates as rising commodity costs offset a robust revenue growth and a healthy jump in exports.
Net income fell 11% to 33.5 billion rupees (R5.8 billion) for the three months ended 30 June compared with the same period last year, India’s largest carmaker said in a filing Friday.
It fell short of the 34.4 billion rupees (R6 billion) average profit estimate derived from a Bloomberg survey of brokerages. This marks the fourth straight quarter of profit miss for the Indian unit of Suzuki.
Revenue rose 36% to 524.6 billion rupees (R91 billion), while total costs surged 41% to nearly 500 billion rupees (R87 billion). Raw material costs jumped by 46%.
The earnings underscore Maruti’s challenges as higher steel and other commodity inflation compresses profitability for Indian automakers.
While the company has benefited from higher sales of its pricier sports utility vehicles and export growth, it still had to take two rounds of price hikes recently to pass on some of the burden to buyers.
The automaker said in May that it will increase prices of its vehicles by as much as 30,000 rupees (around R5,200) to pass on the effects of rising input costs.
It announced a second round of hikes this month. Maruti Suzuki also incurred higher costs from ramping up production at the second line of its Kharkhoda manufacturing plant in Haryana.
But the new facility also made higher sales possible, the company said in a filing. Raw material costs rose during the quarter and were seriously aggravated during the war, it added.
As a result, the operating earnings before interest and taxes margin slumped to 5.1% in the reporting quarter versus 8.4% a year earlier.
The company also approved four compressed biogas, or CBG, manufacturing projects, with a projected first phase budget of 5.6 billion rupees (R970 million).
It’ll consider further expansion of CBG manufacturing too “based on the experience of these projects,” the filing said, as the automaker seeks to build on the early success of its parent’s venture in Gujarat.
Maruti sold little more than 682,700 vehicles during the quarter, with domestic demand remaining resilient and exports climbing about 29% from a year earlier.
Higher realisations from a richer product mix and a favourable currency also supported earnings.
The automaker has also sought to capitalise on an improving entry-level market after several years of subdued demand, spurred by a consumption tax cut which lowered prices of these vehicles.
The company has said sales of smaller cars are recovering alongside stronger rural demand, complementing continued growth in higher-margin sport utility vehicles.
This helped the sector leader bolster its market share by 2.3 percentage points to 41.2%, the filing said.
Maruti’s rival, Hyundai India, also posted a lower-than-expected quarterly profit this week.
Mahindra managed to narrowly beat the profit estimate, boosted by its farm equipment business, but posted a 22% jump in raw material costs.
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