Top Indian carmaker Maruti Suzuki has booked a 93% jump in quarterly profit but warned rising costs and a stronger yen could put pressure on its margins in the future.
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Maruti met forecasts with a INR5.7bn (US$122m) net profit for the fiscal the quarter to September, Reuters reported.
It also warned of an up to 20% fall in demand from Europe once scrappage incentives end next year.
“We have to be ready to accept some shrinkage in our European markets post-scrappage schemes,” managing director Shinzo Nakanishi told the news agency after announcing results.
The company’s exports, largely to European countries, got a boost from the scrappage incentives and other stimulus measures by governments there.
Exports have been led by the A-Star hatchback, which it launched last year. Since it started exports of the car – badged Alto – in January this year, it has sold close to 78,000 units outside India.
Maruti also has a contract with Nissan Motor to export 54,000 A-Stars rebadged as Pixo this year for sale to Europe.
“Our focus is now to develop and expand our non-European markets,” Nakanishi said. The company last quarter commenced exports of the Alto to South America and South Africa.
In this financial year the company expects its total exports at 130,000 units of which 100,000 would be to Europe.
Domestic sales were led by strong demand in India’s festival season under a government stimulus package which brought down borrowing costs and made credit more easily available, the report said. Low oil prices and low inflation also propped up sentiment, especially in the semi-urban markets.
But the company was cautious about the outlook, citing factors such as a rise in aluminium and steel prices and a stronger yen against the rupee, which would push up import costs.
“On volumes, the company remains cautiously optimistic in near future. At the same time, margins in the future may be under pressure due to hardening of commodity prices and strengthening of yen. The company continues to focus on cost optimisation and Kaizen in its operations,” Maruti said in a statement.
“Our profit margin will see some pressure on these accounts. We are keeping caution along with optimism,” Nakanishi told Reuters.
“Watch out for factors like interest rates, liquidity, inflation and fuel prices,” he added.
During the quarter, domestic sales volume grew by 21.8% to 209,083 units, led by new and refreshed models, Maruti said.
During the quarter the company further strengthened its network. Sales outlets rose to 741 in 509 cities versus 681 outlets in 454 cities at the end of the March quarter. Service point now tally 2,813 in 1,338 cities versus 2,767 in 1,314 cities.
