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Maruti Suzuki profit triples after last year’s shutdown

Maruti Suzuki India Ltd,like rivals Tata Motors Ltd and Mahindra and Mahindra Ltd,has been cutting costs during a second year of falling sales.

Written by Reuters | New Delhi | Published: October 29, 2013 2:55:34 am

India’s biggest carmaker Maruti Suzuki beat analyst estimates by nearly tripling its quarterly net profit,flattered by a low base last year and helped by cost cuts and positive currency movements.

Maruti is the first of India’s three biggest domestic carmakers to report second-quarter earnings.

Analysts estimate that profit fell 2 per cent at Mahindra and Mahindra,India’s biggest utility vehicle manufacturer,and rose 22 per cent at Tata Motors,India’s largest automaker by revenue,helped by strong sales at its luxury unit Jaguar Land Rover.

Maruti Suzuki India Ltd,like rivals Tata Motors Ltd and Mahindra and Mahindra Ltd,has been cutting costs during a second year of falling sales linked to high inflation and meagre urban wage hikes in a slowing economy.

But rural incomes are likely to rise thanks to bumper harvests after strong monsoons,and could be spent on vehicles in the year-end festive season when Indians traditionally buy expensive goods.

Maruti is well placed to gain because of a wide dealership network,analysts say. The company,controlled by Japan’s Suzuki Motor Corp,made a third of its April-to-June sales in rural areas.

Net profit in the July-to-September quarter was Rs 670 crore,up from Rs 227 crore a year earlier when a breakdown in labour relations at the Manesar factory led to one death,over 100 injuries,a month-long shutdown and a $250 million production loss.

Earnings had a boost from the inclusion of a recent merger with engine production business Suzuki Powertrain India Ltd.

The mean estimate of 12 analysts according to Thomson Reuters was Rs 552 crore.

Revenue rose 27 per cent to Rs 10,212 crore versus a Rs 10,125 crore estimate,Maruti Suzuki said in a statement on Monday. Its operating margin widened to 12.6 per cent from 11.4 per cent in the previous quarter.

Profit up

* Maruti Suzuki’s net profit surged to Rs 670.23 crore in Q2 on account of sales effort especially in rural areas,cost reduction initiatives and positive impact of foreign exchange.

* The company also benefited from unusually low levels of profit in Q2 of last year owing to labour problems in Manesar

* Its net sales during the quarter stood at Rs 10,211.83 crore as against Rs 8,070.11 crore in the same period a year ago.

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