Beating expectations, the country’s largest passenger cars maker Maruti Suzuki India (MSIL) on Tuesday reported a standalone net profit of ₹1,486 crore for the first quarter ended June 30, up 23 per cent, compared with ₹1,208 crore in the corresponding period last year.

Net sales rose 12 per cent year-on-year to ₹14,654.5 crore (₹13,078 crore), the company said in a statement.

“The profit in the quarter was helped by a higher turnover, material cost reduction, higher non-operating income and lower depreciation. Adverse foreign exchange movement reduced profits to some extent,” it added.

The company sold 3,48,443 units during the quarter, a growth of 2 per cent over the same period of the previous fiscal.

This includes 3,22,340 units in the domestic market, a growth of 5.4 per cent. Exports stood at 26,103 units, MSIL said.

Sales growth in the first two months of the quarter had been 10 per cent but the unfortunate incident of fire at a key vendor of the company resulted in lower sales in June, the statement said, adding that the company hoped to recover lost sales during the course of the year.

According to analysts, the results of the first quarter meet expectations.

“MSIL reported operational numbers for first quarter in line with estimates. EBITDA margins came in at 14.8 per cent against the estimated 14.6 per cent. Profit after tax at ₹1,491 crore beat estimates due to higher other income,” Mihir Jhaveri, Director – Institutional Research, Religare Capital Markets, said.

MSIL’s shares closed at ₹4,485.25 on the BSE on Tuesday, down 1.44 per cent from the previous close.

... but operating margin under pressure

Production loss due to disruption at a vendor’s plant saw Maruti Suzuki record a modest 2.1 per cent increase in volumes.

Despite that, the company’s net sales expanded 12.1 per cent to ₹14,655 crore in the quarter ended June 2016, over the same quarter last year. This was aided by a richer product mix, consisting of vehicles with higher price points such as the Ciaz, SX4 S Cross, Baleno and the Vitara Brezza. Average realisations for the quarter moved up 9.8 per cent, over a year ago.

But the strong show in the topline did not carry through to the operating margins. Operating margins came in at 14.8 per cent, much lower than the 16.2 per cent recorded last year.

With commodity prices reversing from rock-bottom and the base effect also catching up, benefits from cheap raw materials have worn away. Adding to the pressure on input costs is the strong yen.

Apart from direct import of inputs, the company has 10-11 per cent indirect exposure through imports made by vendors. The adverse forex movement has also increased royalty outgo. Higher advertising expenses from the setting up of Nexa premium outlets and the launch of the Vitara Brezza in end-March also dented margins.

However, lower depreciation, due to change in method of depreciating certain assets, as well as a more than doubling of other income helped the car maker post double-digit growth in net profit, Net profit was up 23 per cent at ₹1,486 crore.

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