The “hot” favourite of the stock markets, the poor second quarter performance of Maruti disappointed the investors gravely. Given the slowdown in demand, rising costs and over all financial crisis, the auto sector has slowed down and thus it came as no surprise to see the profit margins of Maruti take a tumble.
For the second quarter ended 30th September 2008, YoY, though net sales of the company rose 9.81% at Rs.4993.62 crore, the 13.38% rise in operating expenses and the 49% drop in other income, led to the EDITDA fall by 22% at Rs.611.75 crore. OPM slipped from 17.29% to 12.25%. Its employee cost and higher raw material expenses were the main culprits.
Interest outgo rose 48%, depreciation by 88% and this led to the PAT slip by 36% to 296.12 crore. NOM was down at 5.93% from 10.26%. The company, since Q1FY09 has changed its method of depreciation and this had led to the escalating rise in depreciation outgo in Q2.
The company’s Swift and DZire continue to do well, so much so that it has increased production to keep pace with demand but there has been a fall in demand for Alto, Wagon-R and Zen. Its new eagerly awaited model “A-Star” is scheduled for a launch in November 08’. Hopefully the exports of this model should help shore up the company’s margins in the coming months. But the actual impact of this launch come in only by Q4FY09 and hopefully by then, some of the financial crisis could have got resolved. By then demand is also expected to show some signs of improvement.
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