Suzuki quadruples profit on soaring India sales

Suzuki Motor Corp quadrupled its annual operating profit forecast on Monday as sales soared in its main Indian market, setting it apart from other Japanese automakers that have depended heavily on the sinking US market.

Suzuki, like South Korean rival Hyundai Motor Co, has been a major beneficiary of a global shift in consumer preference towards smaller cars, partly fanned by government incentives on purchases of less polluting vehicles.

Both carmakers' huge presence in India, where the economy's resilience and tax incentives have jumpstarted demand for cars, has helped them weather the storm better than most in the industry.

Suzuki, Japan's fourth-biggest automaker, raised its operating profit outlook to ¥40 billion ($445 million) for the year to March, from an initial forecast of ¥10bn.

It now expects a net profit of ¥15bn instead of ¥5bn.

Consensus forecasts from 16 brokerages put Suzuki's operating profit for the year at ¥46.6bn, and net profit at ¥22.8bn.

Earlier, Daihatsu Motor Co, the minivehicle unit of Toyota Motor Corp, and Fuji Heavy Industries Ltd, the maker of Subaru cars, also lifted their full-year forecasts after better-than-anticipated six-month results.

But Suzuki joined other automakers in warning of an uncertain outlook at best for global vehicle demand as more state-backed incentives programmes reach their budget limit and threaten to yank back sales.

"It's doubtful whether these scrappage incentives would switch smoothly into real demand," Suzuki Chief Executive Osamu Suzuki told a news conference.

Suzuki said he was not optimistic about a global economic recovery in the October-March second half, although Asian markets such as India and China remained a bright spot. He noted that Suzuki's higher profit forecasts were merely a result of the overshoot in the first six months.

For July-September, Suzuki, known for its Swift and Alto hatchback cars, reported a 7.1 per cent fall in operating profit to ¥24.98bn from the second quarter last year, as global sales volumes decreased and the yen strengthened against the dollar.

The result was double an estimate of ¥12.45bn in a poll of three analysts by Thomson Reuters I/B/E/S.

Net profit grew 27 per cent to ¥10.38bn, while revenue dropped 25 per cent to ¥604.4bn.

Last week, Suzuki's Indian unit, Maruti Suzuki India, reported a near doubling in its quarterly net profit, also powered by brisk exports to Europe.

Daihatsu, which dominates Japan's 660cc minivehicle segment with Suzuki, now expects an annual operating profit of ¥26bn instead of ¥17bn as sale exceed expectations in Indonesia and Malaysia, where it has a big presence.

In July-September, Daihatsu's operating profit fell 35 per cent to ¥6.13bn. Net profit sank 41 per cent to ¥3.25bn.

Fuji Heavy Industries Ltd, also owned partly by Toyota, now expects to eke out an annual operating profit of ¥1bn instead of a ¥35bn loss previously forecast.

Its second-quarter operating profit was ¥8.24bn, down 31 per cent from a year earlier.

Shares of Suzuki lost 3.5 per cent during the second quarter, underperforming Tokyo's transport sector subindex, which was flat.

Before the results were announced, Suzuki ended down 2.9 per cent at ¥2,170 amid broad-based selling in Tokyo as the dollar weakened against the yen.

Daihatsu, whose shares gained 2.1 per cent during the quarter, closed down 2.5 per cent at ¥920 after its announcement. Fuji Heavy lost 5.2 per cent to end at ¥345 despite the higher forecasts.