The Hindu Business Line : Maruti's Q4 profit skids on higher depreciation costs

`The best year': Mr S. Nakanishi, Managing Director and CEO, Maruti Suzuki India Ltd, addressing a press conference in the Capital on Thursday. - Kamal Narang

Our Bureau

New Delhi, April 24

Soaring depreciation costs combined with currency derivatives loss have led Maruti Suzuki to post a decline in its net profit for the fourth quarter ended March 2008, even as its net sales grew.

However, for the fiscal 2007-08, the company recorded a healthy increase in its profits as well as sales. The board of directors recommended a dividend of 100 per cent for 2007-08 as against 90 per cent in the previous fiscal.

Maruti said that the newly adopted depreciation policy since April 1, 2007, under which the company made an additional provision of Rs 212 crore for fiscal 2007-08, impacted the profit figures for the quarter. The depreciation policy has brought down the lifecycle of its tools and equipment to eight years instead of 13 years and for dies four years instead of five.

"The primary reason for changing the depreciation policy is because the lifecycle of various products is now getting shortened. So new tools and technologies are required, due to which we have shortened the life span. There will be recurring impact you will see for a few years," said Mr Ajay Seth, Vice-President (Finance), Maruti Suzuki. In reply to a question, he said the monetary gains of the new depreciation policy would be reflected after the company's capital expenditure plan was completed.

During the quarter, Maruti's net loss on account of its forex cover stood at Rs 50.4 crore, computed on a "marked-tomarket basis on various derivative instruments.

Announcing the results, Mr Shinzo Nakanishi, the company's Managing Director, said, "The year 2007-08 was the best year in the history of Maruti."

Despite the depreciation policy, models such as Swift and SX4 contributed to higher realisations, he said. The company's increased expenditure was due to higher royalty payments, surge in power and fuel costs and currency exchange loss.

In response to a query on the company's plans to hike prices due to high steel costs, Mr Nakanishi said, "We are negotiating with the companies and trying to do our best."

While declining to give the outlook for the current fiscal in terms of numbers, he said, "We are watching the market closely. There are a number of factors, like the availability of retail finance, and stock markets which are negative. But we are looking at positive factors, like the excise duty cut and increase in household income amongst others."

During fiscal 2007-08, Maruti Suzuki sold 7,64,842 vehicles, up 13.3 per cent. The company's exports at 53,024 units grew at the fastest pace of 34.9 per cent during the year.

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