India's largest car maker Maruti Suzuki India has reported a 28 percent drop in profit at Rs 1,291.7 crore and a 17.1 percent decline in net sales at Rs 17,185.7 crore in the last quarter of fiscal 2020. The company blamed lower sales volume, higher sales promotion expenses which could only be partially offset by lower operating expenses, cost reduction efforts and reduction in corporate tax rate, for its poor financial performance.
Already battling a protracted slowdown in the domestic automobile industry that began in July 2018, the performance of the company was also hampered in the fag end of the quarter when the country went into a complete lockdown mode from March 25 to fight the coronavirus outbreak. The last week of a financial year is considered crucial for consumer facing companies as sales generally peak around that time.
During the quarter, Maruti sold a total of 385,025 vehicles which was lower by 16 percent over the same period previous year. In the domestic market, sales were 360,428 units lower by 16 percent while exports were at 24,597 units, a drop of 16.9 percent over last year.
For the full fiscal 2020, the company's profits registered a 24.7 percent decline at Rs 5,650.6 crore while net sales were down 13.7 percent at Rs 71,690.4 crore. This is the second consecutive fiscal that the company has witnessed a drop in profits. In fiscal 2019, its net profit had declined by 3 percent at Rs 7,500.6 crore.
In the full year, the company sold a total of 1,563,297 vehicles, 16.1 percent lower than in 2018-19. In the domestic market sales were down 16.7 percent at 1,461,126 units while exports were lower by 6 percent at 102,171 units.
"Net profit was lower on account of lower sales volume, higher sales promotion expenses and higher depreciation expenses, partially offset by lower operating expenses, cost reduction efforts, higher fair value gains on invested surplus and reduction in corporate tax rate," the company said in a statement.
The Board of Directors of the firm recommended a dividend of INR 60 per share (face value of INR 5 per share) for FY 2019-20. The company's shares were up 1.62 percent in the Bombay Stock Exhcange in an overall market that is up 2.08 percent.