Manesar violence dents Maruti's Q2 net profit by 5.41 pc

 Hit by an unprecedented violence at its Manesar plant and low sales, the country's largest car maker Maruti Suzuki today reported 5.41 per cent fall in net profit at Rs 227.45 crore for the quarter ended September 30.

During the quarter, the company also doled out an all-time high average discount of Rs 14,750 per car to push sales of its models, mainly the petrol ones.
The company had posted a net profit of Rs 240.45 crore in the corresponding period last year.

The net sales during the second quarter of this fiscal, however, went up by 8.53 per cent to Rs 8,070.11 crore, from Rs 7,435.85 crore in the year-ago period.

"This quarter was an unusual quarter. There was challenging environment. The company had an unfortunate incident of labour violence in July and had locked out the Manesar plant," MSI Managing Director and CEO Shinzo Nakanishi told reporters here.
He also said due to the price difference between diesel and petrol, automobile industry continued to be skewed towards diesel products during the quarter.

"The overall industry sales for petrol vehicles declined by 20 per cent, while that of diesel increased by 40 per cent during the quarter," Nakanishi said.

In the July-September period, vehicle sales of MSI fell by 8.69 per cent to 2,30,376 units, from 2,52,307 units in the same period last year.

Out of this, the company sold 2,09,954 units in the domestic market compared to 2,22,406 units in the same period previous year. It also exported 20,422 units as against 29,901 units in last year.

Talking about the violence at Manesar that had killed one senior official and injured nearly 100 people, MSI Chief Financial Officer Ajay Seth said: "Due to the violence, the overall loss of production was about 77,000 units. However, in terms of damages at the plant, since it was insured, the company has recovered (the amount)".

After the violence on July 18, the company had declared a lockout at the plant for one month. It was reopened in August after firing 500 people alleging their involvement.

On discounts, he said the company gave more discounts in the second quarter to attract customers and it was "at an all-time high".

"On an average, the discount in Q2 was Rs 14,750 per car, while it was Rs 12,600 in Q1... This, of course, impacted our margins," Seth said.

To counter subdued demand for petrol cars, the company enhanced sales promotion measures, impacting profitability.

Seth further said the adverse foreign exchange movement had an overall impact of Rs 350 crore on the company during the July-September period.

Meanwhile, MSI scrip closed 2.27 per cent up today at Rs 1,394.55 on the BSE.