Maruti profit slips 3% but beats forecast

India, one of the world's fastest-growing car markets in recent years, suffered from a sharp slowdown in demand in 2011 but buyers have flocked back to automobile showrooms in the past few months as consumer sentiment brightened.

Maruti, 54.2 percent owned by Japan's Suzuki Motor, said net profit fell to 6.4 billion rupees ($122 milllion) in the three months to March from a year earlier, marking its third straight quarterly profit fall.

But "profit was higher than anticipated," noted Dipen Shah, head of fundamental research at India's Kotak Securities.

"After going through a difficult patch, we expect the company's performance to improve in the current fiscal year," he said.

Maruti, battling fierce competition from South Korea's Hyundai and other rivals, outstripped market expectations that it would post a net profit of around 5.6 billion rupees for the fourth quarter.

Revenues climbed 17 percent to 114.86 billion rupees as New Delhi-based Maruti's car sales topped 100,000 units in each of the three months of the quarter, reaching a record high of 125,952 vehicles in March.

However, for the full year, Maruti's profit fell by 29 percent to 16.35 billion rupees as the the auto manufacturer sold 11 percent fewer cars than in the previous fiscal year.

The sharp decline in full-year profit came after Maruti suffered a crippling labour strike in 2011 and sales slowed, while higher commodity prices and a weaker rupee pushed up the company's costs.

Raw material costs jumped 18 percent during the final quarter alone.

"It was a very challenging year," Maruti Suzuki India Managing Director Shinzo Nakanishi told reporters.

In a bid to recover lost market share, Maruti this month launched its first utility vehicle, breaking into one of the country's fastest-growing automobile segments.

The company's passenger vehicle market share slumped to 38 percent during the last fiscal year from over 50 percent just under two years ago.

India's Society of Automobile Manufacturers (SIAM) forecasts car sales will increase by 10 to 12 percent in this fiscal year to March 2013 as cheaper interest rates and new models lure buyers, up from two percent growth last year.

Maruti said it expected car sales growth to be broadly in line with the industry forecast. Industry-wide sales last year totalled 2.02 million cars.

Global automakers from General Motors to Toyota have been steering to India and neighbouring China to boost sales with developed markets saturated.

Just 12 out of every 1,000 Indians own a vehicle, compared with more than 500 out of every 1,000 people in the United States, according to SIAM.

"We remain bullish on the long-term prospects of the passenger car segment," Ronak Sarda, auto analyst at MSFL, told CNBC TV-18.

Source: AFP