Maruti India’s Profit Drop By 48%: Earned Rs 11 Crore/Day In 90 Days (Find Out Why?)

• Maruti’s shares rose more than 7% on Tuesday.
• The company has reported that the chip-shortage crisis has been improving this quarter.
• Maruti’s EBITA margin for this quarter was 6.7%. 
• Japanese company Suzuki Motor Corp, a major stakeholder in Maruti, has predicted a drop of 48% in net profit in the third quarter.
• Maruti reported that their sales have fallen from 495,897 cars a year to 430,668 cars. 

The shares of Maruti, a top carmaker in India rose more than 7% on Tuesday. The company has hiked prices to offset high material costs. This improved margins despite a fall in the third-quarter profit. 

The chip shortage crisis seems to be improving

The company has reported that the chip-shortage crisis has been improving this quarter. They hope that this improvement will help boost production so the company can fulfil pending orders. But, the company has also said that chip production has not reached its full capacity yet.

“Though still unpredictable, the electronics supply situation is improving,” Maruti said in a statement. The company has also stated that it has over 240,000 pending orders.

Earnings before interest, taxes, depreciation and amortisation or the EBITDA margin is a key measure of profitability. Maruti’s EBITA margin for this quarter was 6.7% which was greater than what was estimated by the analysts of 6.2% according to the Redfintiv IBES data. The company’s shares also rose to their highest level since September 2018. 

Suzuki predicts a drop in Maruti’s net profit

Japanese company Suzuki Motor Corp. which is a major stakeholder in Maruti has predicted a big drop of 48% in net profit in the third quarter as production has slowed due to the chip shortage and also the high cost of raw materials. 

Effect of chip-shortage on Carmakers

Carmakers have had to close plants or operate at a reduced capacity during the pandemic. Carmakers are also competing with the consumer electronics industry for chips which is a crucial component in many electronic products. The chip shortage has cost Maruti an estimated 90,000 vehicles in lost production in the last quarter, the company stated.  

Other costs have also increased

The price of raw materials and shipping costs have also increased significantly due to the supply-chain disruption and carmakers are attempting to pass on some of these charges to customers. Maruti has hiked prices at least four times in the last year. 

Maruti has reported that their sales have fallen from 495,897 cars a year to 430,668 cars. 

Maruti experienced a fall in profit 

Profit made by Maruti in the last three months was Rs. 10.11 billion. This was a big decrease compared with the Rs. 19.41 billion profit made a year earlier. Analysts had expected a profit of Rs. 10.58 billion. The total revenue from operations has fallen by 1%. 

Source-https://www.reuters.com/world/india/maruti-suzuki-india-net-profit-falls-48-third-quarter-2022-01-25/?utm_campaign=fullarticle&utm_medium=referral&utm_source=inshorts