TOKYO: Suzuki Motor Corp, Japan's No.4 automaker, posted a 31 percent rise in quarterly profit on Monday on brisk sales in Asia, but stuck to its conservative forecasts as competition intensifies in the key Indian market.
Suzuki has enjoyed robust earnings growth compared with most domestic rivals thanks to its limited exposure to the stronger yen and heavy weighting in India, where majority-held unit Maruti Suzuki India Ltd sells every other car.
But falling margins in India due to rising raw materials prices and slowing growth in the country's car market have weighed on Suzuki's shares, which have been the worst performer among Japanese auto stocks in the past three months.
In the October-December third quarter, Suzuki's operating came to 23.64 billion yen ($287.7 million), up 31 percent from 17.99 billion yen a year ealrier and roughly in line with an average estimate of 24 billion yen in a survey of four analysts by Thomson Reuters I/B/E/S.
Net profit quadrupled to 12.2 billion yen from 3.0 billion yen last year.
For the year ending on March 31, the maker of the SX-4, Swift and other compact cars kept its operating profit forecast at 100 billion yen. A survey of 21 analysts has the profit at 115.8 billion yen, up 46 percent from last year.
"We review our business every six months, and this time we did not revise our forecasts," Senior Operating Officer Takao Hirosawa told reporters.
For the nine months through Dec. 31, operating profit came to 92.46 billion yen, just shy of its full-year forecast.
Auto sales in India grew a record 31 percent in 2010, driven by a burgeoning middle class in Asia's third-largest economy, but analysts expect sales growth to slow to around 12 to 15 percent this year, reflecting a likely hike in interest rates and rising fuel and vehicles costs.
RACE HEATS UP IN INDIA
Suzuki is facing unprecedented pressure from global automakers such as Toyota Motor Corp and Nissan Motor Co , which entered India's low-priced car segments last year with the Etios and Micra models.
Last month, Suzuki Chief Executive Osamu Suzuki singled out Toyota's made-for-India Etios sedan as a "wonderful car" that promised to up the ante for Maruti Suzuki. Toyota, which benchmarked Maruti's top-selling models such as the Alto to develop the Etios, is aiming to nearly double its Indian sales this year, adding a hatchback version of the car in April.
At the same time, Maruti Suzuki is fighting back by moving into the higher end where bigger brands do most of their business. Maruti last week launched the $36,000 Kizashi sedan to take on Toyota's Corolla, Volkswagen's Jetta, General Motors's Chevrolet Optra and others.
Maruti Suzuki reported an 18 percent slide in third-quarter net profit last month as higher royalty payouts and rising input costs weighed on margins.
Shares in Suzuki have fallen 3 percent in the past three months, while all other Japanese automakers gained mainly on the bright outlook in the recovering U.S. market. Tokyo's transport sector subindex rose 21 percent in the same period.
Before the results were announced on Monday, Suzuki, owned one-fifth by Volkswagen, ended up 0.3 percent at 1,987 yen, roughly in line with the transport sector.
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