Favourable exchange rates, soft commodity prices aid profits

At a time when the auto industry is riding on a bumpy road, Maruti Suzuki has reported an impressive set of numbers in the March quarter .

Excluding the sales figures of Suzuki Powertrain (which was merged with the company this quarter) net sales grew by a reasonable 9.4 per cent to Rs 12,566 crore over the fourth quarter of last year. The sales growth has been achieved despite a 4.5 per cent drop in the number of cars sold and an average discount of Rs 10,500 on petrol vehicles during the quarter. This implies that an improved product mix has come to the aid of the company.

With a strong portfolio of diesel cars including the Dzire and the newly launched Ertiga, the company continues to benefit from the shift in consumer preference to diesel vehicles.

The fact that diesel cars are priced higher and bring in higher realisations has helped the growth, even though volumes fell. Diesel vehicles constituted 37 per cent of the total vehicles sold for Maruti this quarter, compared to 25 per cent a year ago.

This strong footing in the diesel segment along with a few other factors has helped the impressive net profit growth of 79 per cent year-on-year to Rs 1,147 crore (excluding Suzuki Powertrain).

Favourable yen –rupee exchange rates helped the company contain material costs. That commodity prices per se were benign was a sweetener.

Two, the company’s localisation efforts are beginning to see results. From about 26 per cent of net sales last year, the import content has come down to 19.5 per cent.

Lastly, Maruti hiked prices in January 2013. Operating margins expanded to about 11 per cent compared with 7.5 per cent in the same quarter last year.

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