Maruti Q1 net surge 63 per cent on revenue growth of 20 per cent

Maruti Udyog, the country's largest passenger car manufacturer, has reported first quarter results, which have beaten market expectations. In line with industry trends, the company managed strong volume growth during the quarter. The company even managed to expand operating margins through better-cost management.

For the quarter ended 30 June, 2006, the company has reported a net profit of Rs369.57 crore – an increase of 63.19 per cent over Rs226.46 crore reported for the previous year quarter. Total revenues increased 20.01 per cent to Rs3, 268.77 crore from Rs2, 723.67 crore for the prior year quarter.

Net sales for the quarter increased 19.18 per cent over the previous year quarter while income from services declined 8.33 per cent.

Operating profits for the quarter increased 40.6 per cent over the previous year quarter. Unlike other auto companies, Maruti managed an improvement in operating margins to 14.61 per cent of net income from operations as compared to 12.37 per cent for the previous year quarter.

The improvement in operating margins was achieved through tighter control on costs. While other auto companies saw input costs rising faster than sales growth, Maruti's input costs for the quarter increased by a modest 14.64 per cent over the previous year quarter. Employee costs were higher by 11.65 per cent while other operating expenses increased 24.28 per cent.

Maruti's bottom line growth was further pushed up by a decline in interest costs and depreciation. Interest expenses declined substantially by 64.36 per cent while depreciation charges were lower by 18.16 per cent. Tax provision for the quarter went up by 63.19 per cent.

Another contributing factor to bottom line growth was a 45.87 per cent rise in other income to Rs143.3 crore as compared to Rs98.24 crore for the previous year quarter.

Maruti sold a total of 144,948 vehicles during the quarter – an increase of 18.94 per cent over the previous year quarter. Domestic sales continued to be the growth driver, recording an increase of 19.25 per cent while export volumes went up by 13.8 per cent.

D S Brar, former managing director of pharma major Ranbaxy, has joined the Maruti board as an independent director.