Suzuki Motor has forecast below-expected flat operating profits this year as a strong yen and turmoil in Europe markets have countered the impact of a sales increase led by India.
This follows similarly conservative guidance from Honda although Toyota today forecast a 48% profit rise this fiscal year as demand recovers in North America, its largest market.
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Suzuki has outperformed the industry in the past few years as consumers around the world shift to smaller, more fuel-efficient cars such as its Swift and Alto hatchbacks.
Analysts said Suzuki would also benefit from recently expanded capacity in its biggest market, India – the company produced a record 1m vehicles at its two plants there in the fiscal year ended March. It plans to add a further 250,000 units from April 2012 to cement its dominance in that fast-growing market where it has a 54% market share.
But the company is concerned about European markets where a weaker euro – originating from Greece’s debt woes – may erode profits.
Chairman Osamu Suzuki told a news conference: “I am afraid the crisis may hit not only the euro, but also the European economy and other currencies.”
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By GlobalDataFor the year to 31 March, 2011, Suzuki forecast an operating profit of JPY80bn (US$874m), 0.8% up from the JPY79.36bn it made last year. It expects net profit to grow 3.8% to JPY30bn.
With strong growth continuing in India, the company expects to increase vehicle sales by 5.7% to 2.482m globally this financial year.
However it warned that a stronger yen would have a negative impact of JPY24bn on its operating profit. Suzuki assumes an average JPY90 to the US$ and JPY115 to the euro, compared with current levels of around 93 and 121.
Suzuki reported an operating profit in the final, January-March quarter of JPY29.5bn compared with a profit of JPY10.45bn a year earlier. Fourth-quarter net profit was JPY13.4bn versus JPY5.8bn the previous year.
Last month, Indian unit Maruti Suzuki India missed forecasts for fourth quarter net profit and warned of margin pressure and slower sales growth as global automakers pile into the competitive compact car market.
However, Maruti remains bullish about its home market which is expected to double to over 3m units by 2015. The company thinks it could easily be 4.5m or even 5m by then based on a number of growth statistics that have seen India’s economy maintain its relentless rise.
Globally, Suzuki will also be looking to realise synergies from its tie-up with Volkswagen, which now has a 20% share in the Japanese company.
The chairman said: “When we announced the tie-up, I assumed it would take a year to discuss between the two companies what we would do. We are in talks, but nothing has been decided.”
