Maruti Suzuki reported its first decline in net profit in eight quarters after India’s largest car maker lost more than 10,000 units in output due to a stir in Haryana and expenses on advertising increased.
Net profit shrank 11.7 per cent during the quarter ended March 31, 2016 to Rs. 1,133.6 crore from Rs.1,284.2 crore in the year earlier period due to agitation for quota by Jats in Haryana and higher advertisement costs related to new models.
Net sales during the quarter climbed 12.5 per cent to Rs.14,929.5 crore from Rs.13,272.5 crore in the year-earlier period.
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The current fiscal is not going to be easy for the automobile sector as some favourable factors from the past year such as forex rates and commodity prices are reversing, Chairman R.C. Bhargava told reporters at a media conference.
“We also have the environmental lobby which would like to stop or reduce our production of cars,” he said.
Full year profit at Maruti Suzuki, however, rose 23 per cent due to larger sales volume and cost reduction initiatives. The carmaker posted its largest-ever annual net profit at Rs. 4,571.4 crore in the year under review against Rs.3,711.2 crore in the year-ealier period.
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Net sales of Maruti stood at Rs. 56,350.4 crore, a growth of 15.9 per cent. Sales volume rose 10.6 per cent at more than 14.29 lakh vehicleswith exports accounting for almost 1.24 lakh units.
The company has also advanced plans to start production at its Gujarat plant by five months and is working towards creating additional capacity at the existing plants to cut the long waiting period for some of its newly unveiledmodels.
Maruti will spend Rs. 4,400 crore in capex on projects mainly to strengthen research and development and marketing infrastructure, up from Rs. 2,500 crore in the year-ago period. A team is in place for land acquisition and Rs. 800 crore had already been invested in expanding its sales network.
On the company’s production plans, Mr. Bhargava said production from the Gujarat plant is likely to commence in January 2017 earlier than the planned May 2017 target.
Maruti is looking to roll out about 10,000 units from the new facility in the current fiscal.
In the meantime, Maruti is working to stretch production at its two existing facilities in Gurgaon and Manesar to produce about 1.57 million units a year against the current capacity of about 1.43 million units.
Managing Director and CEO Kenichi Ayukawa said the company is also exploring the possibility of establishing assembly operations in Africa.
“It is at a very nascent stage, there are people in our international markets’ team who are exploring possibilities, particularly in the African continent,” he said.