Higher sales in rural areas and cost reduction accelerates profit to jump three-fold

New Delhi : Country’s largest car-maker Maruti Suzuki India on Monday said its net profit surged nearly three- fold to Rs 670.23 cr for the second quarter ended September 30 on account of sales effort especially in rural areas, cost reduction initiatives and positive impact of foreign exchange, as compared to a net profit of Rs 227.45 cr in the corresponding period last fiscal.

“This growth was achieved on the back of focused sales efforts, especially in the rural areas, proper product planning, cost reduction initiatives and gain from rupee depreciation,” MSI Managing Director and CEO Kenichi Ayukawa said.
The company also benefited from unusually low levels of profit in the second quarter of last year (July-September 2012) owing to labour problems in Manesar.
Higher localisation and cost reduction initiatives by the company also contributed significantly to bottom line growth during the second quarter.
“The overall impact of forex gain was Rs.164 cr during the quarter compared to the year ago quarter” MSI Chief Financial Officer Ajay Seth said.
The company’s net sales during the quarter under review stood at Rs.10,211.83 cr as against Rs.8,070.11 cr in the same period a year ago. Ayukawa, however, said the market continues to be difficult due to slow economic growth, high fuel cost and inflation.
Commenting on the outlook for the remaining part of the fiscal, Ayukawa said, “Economic scenario continues to be uncertain and we have to rely on our effort to increase sales…we will start feeling the impact of rupee depreciation in the later quarters and our target is to sell more than what we sold last year”. In terms of volumes, sales were up by 19.6 per cent in the second quarter to 2,75,586 units compared 2,30,376 in the year-ago period.
“Discounts during the quarter on an average was Rs.17,500 compared to Rs.13,000 in the same quarter last year,” Seth said. The company said its new diesel engine facility at Gurgaon and the third assembly facility at Manesar went on stream during July-September, 2013.
“With this, the company’s total capacity for vehicle assembly is 1.5 million vehicles per annum,” MSI said. Ayukawa added the demand for diesel has gone down while that of petrol vehicles has picked up.
In the second quarter, automobile industry’s sales of diesel vehicles declined by 14 per cent while that of petrol increased by 16 per cent, he added. Shares of Maruti Suzuki India today closed at Rs 1,513 apiece on the BSE.

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