Maruti Nets 650 cr, Beats Expectations

Net profit for the fiscal year ended March 2011 fell 8.4% to . 2,288 cr, but net income grew 24.8% to . 36,128 cr

Maruti Suzuki beat market expectations with a marginally higher net profit of . 650 crore for the three months ended March 31, 2011, but cautioned that huge investment on new cars could affect its profits in the next few quarters.
The country's largest carmaker saw a 19.8% increase in sales in the fourth quarter to . 9,863 crore, but profit grew just 0.5% from the yearago period due to higher raw material costs and increased expenses on new models. Maruti, which sells more than half of cars sold in the country, sold a record 3,43,000 vehicles in the quarter, 20% higher that the same quarter in last year.
"We are concerned on our profits even as the sales have been best ever," said S Nakanishi, managing director, Maruti.
"We are investing huge amounts on research and development and would go ahead with an array of new car launches that will translate into huge benefit in terms of domestic market share and exports," he said, adding the nuclear meltdown in Japan would not impact supplies of components and raw materials. Japanese carmaker Suzuki owns 54.4% in Maruti.
The company has lined up a capital investment of . 4,000 crore for the current fiscal year with a focus on R&D and product launches. It will also add capacity of 5,00,000 cars by mid-2013. Maruti posted a record sales growth of 25% to 12.71 million vehicles in the 12 months ended March 2011, but expects a lower 15% sales growth this year.
On Monday, Maruti scrip rose 1.53% to close at . 1,326.55 on the Bombay Stock Exchange. In intraday trade the stock rose 2.17% to touch a 30-day high of . 1,335.
The fourth quarter performance marks an improvement from the December quarter when the net profit declined by over 26% due to higher commodity cost and currency fluctuations. The company managed to perform better in the fourth quarter, despite a 24% increase in raw material cost to . 7,598 crore. Maruti raised vehicle prices twice since January to offset higher input costs.
Other expenses increased 31% to . 1,066 crore in the quarter. The company made a royalty payment of . 509 crore to parent Suzuki Motor Company, almost double from the . 285 crore paid the previous year.
Industry analysts said that the company has managed to control costs even as major inputs like steel, lead, nickel, rubber and aluminium rose sharply in the Indian and international markets."There has been some concern on the raw material front and Maruti will have to devise new strategies to beat competition from global players in the domestic market," said Mahantesh Sabarad of Fortune Equity. The muted performance of the fourth quarter impacted the annual fiscal performance of the company as the net profit for the fiscal year ended March 2011 fell 8.4% to . 2,288 crore, although the net income grew 24.8% to . 36,128 crore over 2009-10.

Company has lined up capital investment of . 4k cr for the current fiscal

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