Maruti Suzuki India on Saturday posted 59.81 per cent fall in its net profit at Rs.240.44 crore for the second quarter ended September 30, 2011, mainly due to production loss at Manesar because of labour unrest and foreign exchange loss. It had posted a net profit of Rs.598.24 crore in the same period last year, the company said in a statement.

The rate of decline in profit is the biggest since the third quarter of 2008-09 when the company had reported a similar drop.

Total income from operations during the quarter under review also declined by 14.38 per cent to Rs.7,831.62 crore from Rs.9,147.27 crore in the year-ago period. Vehicle sales dipped by 19.56 per cent to 2.52 lakh units from 3.13 lakh units, it said.

“The company lost 28,539 units during the quarter due to instances of industrial unrest at its Manesar facilities,” it said, adding in value terms it is over Rs.850 crore.

The bottom line was also impacted due to sluggish market conditions and adverse foreign exchange rates.

“This has not been a good quarter for Maruti. Market has been declining largely because of high interest rates and fuel prices.

The result of all these is the increase in the cost of ownership in cars, which has mainly hurt marginal customers, who buy mainly M800 or Alto,” company Chairman R. C. Bhargava told reporters here. During the quarter, Alto sales dipped by about 20 per cent to an average of around 22,000 units a month from about 27,000 units in the year-ago period.

Managing Director and CEO S. Nakanishi said during the quarter, Japanese yen appreciated by about 20 per cent that had impacted the bottom line of the company.

Chief Financial Officer Ajay Seth said the company suffered an impact of about Rs.100 crore due to forex loss. Besides, the company's royalty payment to parent Suzuki Motor Corp had increased to Rs.449 crore, which was about 6 per cent of net sales due to yen appreciation, he said.

Third facility

Meanwhile, the board of directors approved the company's third manufacturing facility, to come up in Mehsana district of Gujarat. It will be the company's first major establishment outside its base in Haryana.

“The board has approved that we should go ahead and purchase the land. We are looking at an area of maximum of up to 1,500 acres, out of which 400 acres will be for the vendor to develop their plants,” Mr. Bhargava said.

The land would be given partly by the Gujarat Government and it would be partly acquired from private owners, he added.

“The idea is not to set up the plant immediately, but do it as and when the market situation demands... The board wants the purchase of the land to be completed as soon as possible, may be within the next four weeks,” Mr. Bhargava said, adding the new plant in Gujarat would not come up before 2013. In June, the company had said it along with vendors could invest up to Rs.18,000 crore in Gujarat as it looked to produce about 20 lakh units in the long run in the State.

Asked about the reasons for going to Gujarat, Mr. Bhargava said: “It is for the kind of positive place to do work as we already have the Mundra port, which we are using for almost all of our exports. We do expect that once the global market, particularly Europe recovers, demand of cars will shift towards smaller cars. Therefore, we want to be ready for meeting the requirements for the global market.” Asked if the company could leave its facility in Manesar due to repeated adverse labour situations, Mr. Bhargava said: “At any stage, we are not moving out from Manesar. It does not make any sense”.

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