India's top carmaker Maruti Suzuki margins disappoint on rising costs

Unit sales more than tripled in the quarter to 353,614 vehicles from a year earlier

  
A worker cleans a Maruti Suzuki car as he is being reflected on a car at the company's stock yard at Sanand in the western Indian state of Gujarat October 30, 2012. REUTERS/Amit Dave

A worker cleans a Maruti Suzuki car as he is being reflected on a car at the company's stock yard at Sanand in the western Indian state of Gujarat October 30, 2012. REUTERS/Amit Dave

BENGALURU - Maruti Suzuki India Ltd missed estimates for quarterly profit margins on Wednesday as rising raw material costs eclipsed a robust revival in demand for its vehicles.

India's top carmaker and its global peers have come under pressure due to rising prices of commodities from steel to copper. Maruti has tried to preserve its margins by passing on the costs to its customers, having raised vehicle prices thrice this year.

Still, its earnings before interest, taxes, depreciation, and amortization margin, a key measure of profitability, of 4.6% for the first quarter came in below analysts' estimates of 5.7%, according to Refinitiv IBES data.

The margins also suffered due to lag in the passing on of the costs to customers through price hikes, said Mitul Shah, head of research at Reliance Securities.

But with people preferring personal transportation during the pandemic, the New Delhi-based company posted a near five-fold rise in unit sales in the quarter to 353,614 vehicles.

That helped it post a profit of 4.41 billion rupees ($59.28 million) for the three months to June 30, compared with a loss of 2.49 billion rupees a year ago, when a nationwide COVID-19 lockdown brought economic activity to a virtual standstill.

Total revenue from operations rose four-fold to 177.71 billion rupees.

While all parameters were substantially better this quarter, a comparison is not meaningful because last year had a much higher degree of disruption due to the pandemic, Maruti said.

Sequentially, its sales were 28.2% lower as the second wave of COVID-19 infections hampered business in the June quarter.

($1 = 74.3900 Indian rupees)

(Reporting by Chandini Monnappa in Bengaluru and Aditi Shah in New Delhi; editing by Vinay Dwivedi and Aditya Soni) ((Chandini.M@thomsonreuters.com; +918061822697;))


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