Industry

Maruti Suzuki Q4 profit hit by higher taxes, interest cost

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It sees higher fuel prices, currency fluctuations as key challenges.

India’s top car-maker Maruti Suzuki India Ltd. posted a 10% increase in fourth-quarter net profit, which was affected by higher tax expenses and interest costs.

Looking ahead, the firm saw higher fuel and commodity prices and foreign exchange fluctuations as key challenges despite a strong product portfolio.

The company’s fourth quarter net profit increased 10% to ₹ 1,882 crore from ₹ 1,711 crore in the same period last year. Net sales rose 14.4% to ₹ 20,594.3 crore.

Maruti sold a total of 461,773 vehicles in Q4, up about 11.4% from a year earlier. Domestic sales grew 11.6% to 427,082 units in Q4.

Tax expenses jumped 31% to ₹ 752 crore in the fourth quarter.

In Q4, the company’s interest cost increased to ₹ 273.1 crore from ₹ 2.26 crore a year earlier. This is mainly due to a one-off interest payment of ₹ 250.7 crore as part of enhanced compensation to landholders for company's freehold land at Manesar.

The company’s fourth quarter operating margin at 14.2% came below our expectation of 15.8%, due to higher advertisement expenses, Abhishek Jain, Analyst at HDFC Securities, said.

He noted that the firm’s acceleration in premium cars and UV segment is heartening. It faced challenges in the form of increasing fuel prices and slowdown in demand from cab aggregators such as Ola and Uber owing to cut down in incentives for car owners/drivers.

Another analyst said that the currency fluctuations would have resulted in higher royalty payments to Maruti’s Japanese parent Suzuki Motor Corp, which is reflected through jump in other expenses.

The company declared a dividend of ₹ 80 per share for 2017-18, up from ₹ 75 per share in 2016-17.

To commensurate the 35th anniversary, the board has given its nod for formation of an Employee Welfare Fund and also a Trust to promote scientific research and technology in India which would be created later this year. Maruti would contribute 1% of its net profit of the previous year each to the Fund and the Trust.

Shares of Maruti fell nearly 2% to end Friday’s trading session at ₹ 8,777.95 on BSE, while the broader market ended in a positive zone.

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Printable version | Jan 18, 2020 5:17:19 AM | https://www.thehindu.com/business/Industry/maruti-suzuki-q4-profit-hit-by-higher-taxes-interest-cost/article23698083.ece

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