Maruti Q2 net skids 60% on labour troubles, forex losses

Our Bureau Chennai | Updated on March 12, 2018

A file photo of Maruti Suzuki's Manesar plant. The company's net profit fell 60 per cent in the second quarter due to labour unrest at Manesar unit.



Maruti Suzuki India Ltd (MSIL) has reported a 60 per cent fall in net profit in the second quarter of this year. This is the biggest drop in profit which the company has registered since the third quarter of 2008-09.

The net profit for second quarter stood at Rs 240.44 crore against Rs 598.24 crore in the same period last fiscal owing mostly to the production loss at Manesar because of the labour unrest as also due to foreign exchange loss.

During the second quarter, the company's vehicle sales dipped 20 per cent to 2,52,307 units from 3,13,654 units in the same period last year. This production loss is valued at over Rs 850 crore.

“Since June 2011, the company has suffered production losses of 83,000 cars with loss of 43,000 cars occurring only in October.

“This was because Maruti's Gurgaon plant also suffered losses due to supply constraint from Suzuki Powertrain India Ltd (a subsidiary of Suzuki Corporation, which also declared strike in solidarity with MSIL's Manesar workers),” Mr. R.C. Bhargava, Chairman, MSIL, told newspersons here.

MSIL's total income from operations during the second quarter declined by 14 per cent to Rs 7,831.62 crore (Rs 9,147.27 crore in the previous year).

“MSI's bottomline was also impacted due to appreciating yen. Besides costlier imports of components from Suzuki Corporation, our royalty payment as a percentage of revenue has gone up to 6 per cent in this quarter from 5.5 per cent in second quarter of 2010.

“The total impact suffered by the company on account of exchange rate is about Rs 100 crore,” Mr Ajay Seth, Chief Financial Officer, MSIL, said.

During the quarter, the domestic auto industry remained sluggish on account of increase in fuel prices and hardening interest rates, leading to higher sales promotion expense.

M800 and Alto were hit the hardest “as these are in the most price-sensitive segment,” Mr Bhargava said.

The company has seen the biggest drop in the sales of the Alto. During the quarter, the sales dipped by about 20 per cent to an average of around 22,000 units a month from about 27,000 units in the year-ago period. In the second quarter, the company's consumption of raw materials and components decreased by 19 per cent to Rs 5,649.65 crore (Rs 6,938.88 crore in the corresponding period) on account the labour unrest. The total expenditure also went down during the second quarter by 9.76 per cent to Rs 7,603.80 crore (Rs 8,426.20 crore in the year-ago period), MSI said.

Deal with Fiat

MSIL is expecting to finalise a deal with Fiat to source diesel engines from the latter's Ranjangaon plant in the next two months.

“The deal with Fiat is being worked out considering the fact that the company's main supplier Suzuki Powertrain India Ltd (SPIL) has reached its peak production capacity of 25,000 units a month,” Mr Bhargava said.

He said that once the deal is finalised, Swift production will go up to about 20,000 units a month. Before the labour unrest, the company was making about 18,000 units of Swift a month.

Mr Bhargava said that the company has over 1,00,000 bookings of new Swift, of which, 88 per cent was for the diesel version.

“At the current levels of production, it will take us about six months to clear the backlog,” he added.

“The cancellation of orders of Swift is 8-9 per cent since the launch of new Swift in August.

“As of now the waiting period for Swift diesel is six months and for petrol variant is 2-3 months,” MSI Managing Executive Officer (Marketing and Sales), Mr Mayank Pareek, said.

Published on October 29, 2011

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