Maruti's Q4 profit down on higher depreciation costs

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 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.

During the quarter, Maruti's net loss on account of its forex cover stood at Rs 50.4 crore, computed on a marked-to-market basis on various derivative instruments. The company's increased expenditure was due to higher royalty payments, surge in power and fuel costs and currency exchange loss. During fiscal 2007-08, Maruti Suzuki sold 764,842 vehicles, up 13.3%. The company's exports at 53,024 units grew at the fastest pace of 34.9 per cent during the year.