Companies

Maruti Suzuki Q2 net profit falls 39 per cent on lower sales

Our Bureau New Delhi | Updated on October 24, 2019

The decline in numbers are on account of lower sales volume, higher sales promotion expenses and higher depreciation expenses

Maruti Suzuki India (MSIL) on Thursday reported a standalone net profit of ₹1,358 crore for the second quarter ended September 30, 2019 one of the worst quarterly profits it reported in the last four years, due to exceptionally weak demand environment in the automobile industry.

The net profit was down 39 per cent year-on-year (YoY) as compared with ₹2,240 crore recorded in the corresponding period last year.

Net sales for the quarter under review also declined by 25 per cent YoY to ₹16,120 crore as against ₹21,551 crore in the July-September quarter last year. The decline in numbers are on account of lower sales volume, higher sales promotion expenses and higher depreciation expenses, partially offset by cost reduction efforts, higher fair value gains on invested surplus and a reduction in the corporate tax rate, the company said.

Sales volume during the quarter under review stood at 3,38,317 units, down 30 per cent as compared with same period last fiscal.

"The results for the quarter (July-September) and half-year (April-September) FY 2019-20 have to be viewed in the context of an exceptionally weak demand environment. This year, the automobile industry has seen a significant decline in sales, owing to several factors. One of the main factors is an increase in the cost of acquisition of cars due to various reasons coming together, including implementation of more stringent safety and emission (BS6) norms, increase in vehicle insurance expenses and a hike in road taxes in many states," MSIL said.

Hoping for a turnaround

RC Bhargava, Chairman, MSIL said that the company was giving one of the biggest ever promotional offers (discount schemes) right now since the festive season started, but when one can see the market coming back to normalcy, can’t be known at this point in time.

“I would need a crystal ball to make a prediction when a turnaround can happen and when our profits will reach to whatever level it should reach. Unfortunately I don’t have that kind of crystal ball with me,” Bhargava said on a humorous note when asked if there is any turnaround in the market is expected anytime soon.

Having said that he also added that “We will be waiting and watching and doing our best. I am hoping that, and I am sure it (turnaround) will, in the course of next few months. Things will start moving around in a positive way...why should it not turn around?”

He said cars production is a major part of manufacturing industry in the Indian economy and if any company decides to stop manufacturing, it would mean huge job losses and huge revenue to the Central and State governments because of GST.

“In most manufacturing countries, which are car producing countries, a car industry is almost the bellwether of that State and the economy. As long as the auto industry is in good health, the economy is in good health,” Bhargava quipped adding that what Indian economy requires right now is creating jobs and only auto industry can provided maximum jobs.

Shares of MSIL closed at ₹7,390.40 apiece on the BSE on Thursday, down 0.66 per cent from the previous close.

 

Published on October 24, 2019

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