Costlier commodities dent Maruti's profit

Our Bureau Mumbai | Updated on January 29, 2011 Published on January 29, 2011


Maruti Suzuki has reported an 18 per cent drop in net profit to Rs 565 crore (Rs 687 crore) for the third quarter ended December 31, 2010.

Maruti Suzuki has reported an 18 per cent drop in net profit to Rs 565 crore (Rs 687 crore) for the third quarter ended December 31. The company attributed this to adverse foreign exchange movement, higher royalty payout and increase in commodity prices.

Net sales rose 26 per cent to Rs 9,277 crore (Rs 7,333 crore), while in terms of numbers this was a record quarter with 3.3 lakh units (including exports), a growth of 28 per cent.

Mr Ajay Seth, Chief Financial Officer, said: “The combined impact of rising raw material costs and upgrading models to the new emission norms were 150 basis points (bps). The bottom-line was further affected by another 200 bps due to a change in product mix and currency fluctuation. “The euro's depreciation against the dollar hit export earnings while the yen's appreciation against the rupee made component imports more expensive.” In the corresponding quarter last year, he added, commodity prices were at a low. Steel prices have since risen 15 per cent, copper 30 per cent, while precious metals like rhodium have become dearer by 10-15 per cent. Rubber prices have also been at an all-time high.


Royalty paid to parent Suzuki Motor Corporation was Rs 460 crore, 5.5 per cent of net sales but still lower than the preceding quarter which was Rs 472 crore. “We import components for all models except the 800 and Omni van. On an average, 10 per cent of the parts come from Japan and these are largely transmission and engine parts as well as electrical components,” said Mr Seth.

As for the fourth quarter, Mr Seth said Maruti would watch rising interest rates and commodity prices though it was confident of brisk demand.

“Though we raised model prices this month, it was not enough to completely offset higher input costs. Margin pressures remain and we will look at all factors in the current quarter,” he said.

The company has targeted capacity of 1.4 million from April 1, from 1.2 million now.


Published on January 29, 2011

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