Several challenges confronted Maruti Suzuki in the September quarter. For one, the nearly month-long shutdown and later, the slow ramp-up in the Manesar plant meant lower diesel vehicle production at a time when these cars were in great demand. The company’s volumes were hence lower by nine per cent over last year.
Secondly, to boost demand for its petrol vehicles, the company’s average discounts moved up significantly. During the July-September 2012 period, the company offered an average discount of Rs 14,150 per vehicle, against Rs 11,650 in the June 2012 quarter. Discounts in the September last quarter were Rs 12,600.
Lastly, though adverse currency movements restricted the gains from softer commodity prices, the company did not take any price increase during the quarter, doing so only in October.
Sales up
Despite these challenges, the company managed to improve its net sales by 8.5 per cent to Rs 8,070 crore. Average realisation per vehicle moved up from Rs 2.94 lakh to Rs 3.5 lakh. This was predominantly due to the addition of the utility vehicle Ertiga to the product portfolio, at a higher segment and price point.
Improved export realisations have also helped to an extent. Besides, the tepid performance of the company in the September last quarter - thanks to the strike and lock-out then – helped in the form of a lower base.
Profits hit
However, the growth in top-line did not carry through till the end, despite the slight improvement in operating margins from 5.7 in the September 2011 quarter to 6.1 per cent now. Lower other income, along with increased depreciation, finance costs (from ongoing diesel engine capacity expansions) capped the profits. Net profits fell by 5 per cent.
With production at the Manesar plant moving up to almost 88 per cent of its peak capacity, the Ertiga doing well and the successful launch of the Alto 800, volume growth will not be difficult to come by in the coming months. Recent price increases and lower discounts post the festival season could also help the company improve its margins in the second half.