Maruti’s quarterly profits down; merely 14,000 Rupees per car!

[DukeNukem]

In the face of the rupee’s recent slide against the yen, Maruti Suzuki’s net profit in the first fiscal quarter was down by 22.8%.

The rupee’s value against the yen has been on a steady drop; down from almost 1.7 yen to a rupee in March 2012 to 1.4 yen currently. Japan’s Suzuki Motor Corp owns 54.2% of Maruti and car components are heavily imported from there, hence pushing up their manufacturing costs in recent months.

Net profit was down to Rs 423.77 cr from Rs 549.23 cr in same quarter last year, the fourth consecutive fall in quarterly net profit for India’s largest car manufacturer.

This, despite the fact that Maruti's net sales went up by 27.5% for the quarter. Growth of around 5% in both domestic and export markets was due to strong performances by the Swift, Dzire and Ertiga. However, other models like the Alto and WagonR are still performing below par, as the market continued to be skewed in favour of diesel cars.

Meanwhile, it looks like Maruti's woes are not seeing the end of the tunnel any time soon. The full impact of the indefinite Manesar lockout is yet to be felt. The Maruti camp must be experiencing a strong sense of déjà vu – last year’s unrest at the Manesar plant caused a production loss of about 80,000 cars, affecting their sales, profits and market share.

Daily losses due to the current lockout at Manesar have been pegged at 1,800 cars and Rs 90 cr.

[ike]

The growth in sales of 27% is a good result but profitability depends on a lot of variables. The yen continues to be strong and I believe they have run out of swifts and the dzire which were the biggest selling Suzuki cars. Their share prices have also tanked and at the moment things are not looking up for maruti.

[a4anurag]

Originally Posted by DukeNukem

Meanwhile, it looks like Maruti's woes are not seeing the end of the tunnel any time soon. The full impact of the indefinite Manesar lockout is yet to be felt. The Maruti camp must be experiencing a strong sense of déjà vu – last year’s unrest at the Manesar plant caused a production loss of about 80,000 cars, affecting their sales, profits and market share.

Daily losses due to the current lockout at Manesar have been pegged at 1,800 cars and Rs 90 cr.

Pity situation I say.

If the Manesar issue settles doen soon it would be better to see the diesel sales back on track and profits too. 90 cr a day is too much and have to see by when the Gujrat plant is ready for production and better id the diesels are shifted to GJ from Manesar.

[dZired]

The problems maruti is facing dont seem to end. The manesar lockout will further show its impact in the next quarter so there wont be any good news at that time too. I am waiting for this month's sales figures to be uploaded by GTO. It will clearly depict the further losses which the company has faced after this quarterly report.

[GTO]

I am shocked!

424 Crores Net Profit
295,896 cars sold (domestic: 263,264 units, export: 32,632 units)

Net profit is a measly Rs. 14,329 per car! That's less than what a Maruti dealership averages per car. Add profits from insurance, registration charges, extended warranty sales, accessories and a dealership probably makes 4 - 5 times average per car than Maruti.

If I were a shareholder, I'd be mighty cheesed off. Heck, my neighbourhood used car broker makes more money per car.

Here's what some global majors make per car (amounts in US$)

Daimler 3316
BMW 3000
Renault 1741
Nissan 1500
Ford 1320
VW 1288
Honda 833
Hyundai 810
GM 553

Source

[ajmat]

I think Suzuki mop up a hefty royalty fee also.

[GTO]

Originally Posted by ajmat

I think Suzuki mop up a hefty royalty fee also.

They sure do.

But what about Maruti-Suzuki shareholders? The most recent dividend was Rs. 7.5 on a share price of over Rs. 1,000!!

[iliketurtles]

Thanks for that piece of analysis on profitability per car GTO. Very insightful for the general public. Very jarring for anyone directly invested in Maruti Suzuki's well being.

They have to turn the Manesar situation around, it is hurting them very badly at the minute as the numbers attest. But with the plant not scheduled to start until mid-August at the least, things are not good on that front.

[.sushilkumar]

Originally Posted by ajmat

I think Suzuki mop up a hefty royalty fee also.

+1 . in addition to Share of profit ( roughly 54 % depending upon holding in the company) . Royalty was one reason why Maruti has decided to setup in house R & D center in haryana but will this stop this payout is anybody;s guess .

Originally Posted by GTO

They sure do.

But what about Maruti-Suzuki shareholders? The most recent dividend was Rs. 7.5 on a share price of over Rs. 1,000!!

On a Share face value of re 5 , that counts to a hefty dividend. Some 150 % .

IMO maruti needs to look towards Hyundai to shed that tag of cheap car maker and crack the upper segments . May be starting some thing on lines of Lexus ( starting a new brand with premium image )

[CARDEEP]

Originally Posted by ajmat

I think Suzuki mop up a hefty royalty fee also.

Royalty is one of the biggest factor for lower profits for MS, no guesses for where the royalty goes to... Suzuki Japan, which pays Suzuki Family hefty dividends.

[zoombiee]

Originally Posted by CARDEEP

Royalty is one of the biggest factor for lower profits for MS, no guesses for where the royalty goes to... Suzuki Japan, which pays Suzuki Family hefty dividends.

I also think Fiat makes a good deal of money from the *DI cars that Maruti sells. The profits could also be down owing to investments made on future expansions. Need to have a more detailed insight into the balance sheets.

[smartcat]

This is a temporary problem, which can fixed over a period of time. This is a SUPPLY issue, not a DEMAND issue that they have. Supply problems can be more easily fixed than demand (which Tata Motors car division has) problems

Originally Posted by .sushilkumar

On a Share face value of re 5 , that counts to a hefty dividend. Some 150 % .

"Dividend of 150%" has no meaning. You need to look at dividend payout ratio which is 11% - that is, they pay only 11% of their profits as dividends. In comparison, almost all other automobile (2 wheeler/4 wheeler) payout 25% - 40% of their profits as dividends.

Originally Posted by GTO

But what about Maruti-Suzuki shareholders? The most recent dividend was Rs. 7.5 on a share price of over Rs. 1,000!!

That means, if somebody had invested Rs. 1 Lac in Maruti, they would have got just Rs. 660 as dividend.

But Maruti has never been a shareholder friendly company. If Suzuki had its way, they would have delisted the company. They see no reason why they have to share their profits with minority shareholders in the form of dividends. That's why Maruti pays out an unusually high amount as royalty - because money goes into Suzuki coffers.

[CARDEEP]

Originally Posted by zoombiee

I also think Fiat makes a good deal of money from the *DI cars that Maruti sells. The profits could also be down owing to investments made on future expansions. Need to have a more detailed insight into the balance sheets.

Royalty for engines supplied cannot be avoided, as Suzuki do not have the know how for diesel engines, but, royalty in the name Jap R&D can be avoided, by setting up advanced R&D center here. Who doesn't know the role of Indian arm in Swift's & now Ertiga's development?

What is meant by Rs14K profit per car means Earning after Interest & Tax, which should be available for Dividend declaration. I fear the rate at which Suzuki Jap claim royalty could be the biggest factor of low earnings to Indian Stakeholders.

[.sushilkumar]

Originally Posted by smartcat

"Dividend of 150%" has no meaning. You need to look at dividend payout ratio which is 11% - that is, they pay only 11% of their profits as dividends. In comparison, almost all other automobile (2 wheeler/4 wheeler) payout 25% - 40% of their profits as dividends.
.

Thanks for that smartcat. So I guess that major profit of MSIL is going back to majority share holder in japan & this profit is calculated after paying royalties (correct me pls if i am wrong). In nutshell parent suzuki is making a killing from indian JV thus leaving minority share holder high and dry. i wonder why minority share holders are not protesting against these hefty royalty payments. may be numbers are heavily stacked against them in board meetings.

Strangely enough while all manufacturers are having their own diesel engines, MSIL has still not taken a step in developing diesel engine for itself thus paying heavily to FIAT .

[bblost]

I don't really understand business. But its interesting to note Maruti sells more than Tata. But Tata shares appreciate (Tata Motor's stock price up by 72% in 4 months!)much better than Maruti.