Maruti Suzuki profit misses estimates as cost surge, fall in other income squeezes margins

Maruti Suzuki reported a surprise drop in quarterly profit on Tuesday, missing estimates, as rising costs and a sharp fall in other income offset gains from a tax cut-led recovery in vehicle demand in India.

Indian carmakers, which benefited from a recovery in demand after September tax cuts lifted showroom traffic and supported pricing in small cars and SUVs, are now facing margin pressure from rising costs despite record sales.

The Swift maker posted profit of 35.91 billion rupees ($380 million) for the quarter ended March 31, down from 38.57 billion rupees a year earlier and below analysts’ estimates of 41.38 billion rupees, according to LSEG data. The company kicks off quarterly results for automakers in the country.

Maruti said raw material costs surged nearly 51%, lifting total expenses 28% from a year earlier and hurting profitability. Profit was also hit by a 67.3% drop in other income, which includes investment earnings.

Margins contracted 270 basis points to 7.2%.

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Revenue at the Brezza SUV maker rose to 524.49 billion rupees, helped by higher volumes and improved realizations.

The company, majority-owned by Suzuki Motor, was among the biggest beneficiaries of the tax cuts, posting a 3.7% rise in domestic sales.

Maruti said sales were constrained by production limits, with about 190,000 pending customer orders at year-end, including nearly 130,000 for small cars, while dealer inventory stood at a lean 12 days.

Small-car sales fell 4.3% in the quarter but were up 2.3% for the full financial year.

Overall sales, including exports and supplies to Toyota under their global manufacturing and design partnership, rose nearly 11.8% from a year earlier.