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Maruti back on profit track

BS Corporate Bureau

Maruti Udyog, the country’s largest car-maker, has posted a net profit of Rs 300 million during the first half of 2001-02, as against a loss of Rs 1.04 billion registered during the same period of the previous financial year.

Net sales also improved from Rs 44.9 billion in the first half of 2000-01 to Rs 46.65 billion during April-September 2001-02. During the period, Maruti sold 1,69,888 cars against 1,61,266 units in the corresponding period of the previous year -- a 5.3 per cent improvement in volume terms and 3.9 per cent in value-terms. The volume growth was against a decline of 6.1 per cent reported by the passenger car industry during the period.

Briefing reporters after a board meet which approved the audited half-yearly results here, Maruti managing director Jagdish Khattar said: "Our target is to neutralise the Rs 2.69 billion net loss incurred during the fiscal 2000-01. The effort is to break even this year. Let us see how the remaining months work out.”

Last year’s net loss on a turnover of Rs 92.5 billion, was the first annual loss reported by the car-maker in its 17-year history.

Healthy financials for the 50:50 joint venture between the government and Japan’s Suzuki Corporation will also bode well for the government which has decided to disinvest its shareholding by renunciating its entitlement of a proposed Rs 4 billion rights issue during this financial year.

Auto sector analyst with ICRA, Subrato Roy, said Maruti’s fortunes have turned around in the half-year because of more volumes in profitable segments. “Also, last year, the depreciation cost was extremely high because production and launches of several new products were being lined up. These new variants and products have done well for the company,” he added.

Khattar attributed the turnaround to several cost-cutting initiatives the company has taken during the year.

“Our manufacturing costs are down by 26 per cent. We have now started localisation of inner vehicle parts with vendors and increased efficiencies at various levels of the value chain. While productivity has increased, average defects have reduced. We have also brought down inventories substantially by streamlining the processes. Also, with overall improvement in quality, warranty costs are declining,” he said.

It is noteworthy that Maruti has reported a profit during the first half of the current financial year in spite of the Rs 650 million it spent on a voluntary retirement scheme that pruned its workforce by over 1,000.

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