Maruti Suzuki puts up a good show in Q2, despite COVID

Improvement due to demand recovery and gradual improvement in supply conditions

MARUTISUZUKI-RESULTS/ Maruti Suzuki reports 1% rise in Q2 net profit | Reuters

In what would warm the cockles of many auto industry mandarin's hearts, Maruti Suzuki put up an impressive show with its July-September quarter results. Revenue, sales and profit showed a healthy increase, despite the uncertainties of the pandemic and lockdown haunting the automobile industry.

While the year-on-year profit went up just one per cent, it is still a matter of solace, considering the utter crash the industry had to deal with in the previous quarter (April-June) clouded by lockdown restrictions. Also heartening is the fact that while profits went up just one per cent, total revenue did go up nearly 10 per cent, fueled by a 16 per cent increase in volumes.

That amounts to 3.93 lakh vehicles during quarter two, bringing in net sales revenue of Rs 17,689 crore. This is higher by 9.7 per cent compared to the same period last year, when there was a protracted slowdown affecting the domestic economy in general, and the auto industry in particular.

In fact, the pandemic did have its advantages. According to the car maker's balance sheets, the operating profit of Rs 1,167 crore was an increase of 71 per cent compared to the same period of the previous year, thanks mainly to lower operating and promotion costs, as well as higher sales, which analysts attributed to the pent-up demand from the lockdown period in early summer. The company's cost reduction exercises, caused by post-lockdown realities as well as increase in commodity prices and adverse foreign exchange movement, also helped.

“In quarter one, the performance of the company was significantly due to COVID-19 related disruptions and lockdowns. In quarter two, the performance improved on the back of some demand recovery and gradual improvement in supply conditions. Production across the company's factories and supply chain was progressively ramped up,” said an official release.

The second quarter's bright performance has helped the company to turn a profit for the financial year so far, despite the loss of the whole month of April, and most of May, due to the lockdown. Thanks to the July-September figures, India's top car maker is already showing profits for this finance year, even if it is nearly 60 per cent lower than that of last year.

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