JAPAN: Suzuki quarterly operating profit up 14%

By just-auto.com editorial team | 4 November 2004

Suzuki Motor, Japan's top minivehicle maker, reported a 14% jump in quarterly operating profit on Thursday on booming Asian demand for small cars and stuck to its forecast for another year of record earnings.

A Reuters report noted that rival Daihatsu Motor last week also revealed rosy results thanks to brisk sales of minivehicles and one litre-engine compact cars at home.

The report said a major driver of Suzuki's growth has been the fast-growing Indian market, where its locally made Maruti 800, Alto hatchback and other models make up nearly half of the country's car sales through majority-owned Maruti Udyog Ltd.

While Daihatsu relies heavily on the domestic market and orders from Toyota, Suzuki's strength lies in its strategy of seeking growth outside Japan, whose car market has stagnated for the past decade, Reuters noted.

"Suzuki is doing well, especially in India, and its sales are very strong," an unnamed market analyst at a Japanese asset management firm told the news agency, adding he was surprised the auto maker kept its full-year dividend forecast at 8 yen versus 9 yen last year.

Operating profit at Suzuki, owned one-fifth by General Motors Corp. and Japan's fourth-biggest auto maker by stock value, was 26.71 billion yen ($US251.7 million) for July-September, shaking off losses from a weaker dollar, the report said.

Net profit unexpectedly fell 2.6% to 12.12 billion yen after the company took a 3.8 billion yen charge to account for the drop in value of land assets, Reuters added.

Sales expanded by 12.6% to 575.41 billion yen driven driven by stellar demand for its compact cars in Europe and minicars in Japan, where the 660cc vehicles get preferential tax treatment and make up a third of the car market.

Through Maruti, India's biggest auto maker, Suzuki also plans to boost its share of the burgeoning compact segment with a 1.3-litre premium hatchback to compete with Hyundai Motor Co.'s Getz and Fiat's Palio models, the report said. The model, which went on sale in Japan as the Swift on Monday, is being built in Japan and will also be built in India, China and Hungary as a strategic model to help Suzuki grab a bigger piece of the compact car segment around the world.

"We're expecting equally strong domestic sales in the second half, but demand should be a bit better for the non-mini segment thanks to the contribution from the Swift," President Hiroshi Tsuda told Reuters.

After a double-digit jump in profits last year, Suzuki, known for its cost-cutting savvy, is expecting another record-breaking year fuelled by steady gains in the thriving Asian market, which accounts for about a fifth of its revenues, the report said. It maintained its forecasts for 100 billion yen operating profit and 60 billion yen net profit - projections that most analysts reportedly say are conservative. In 2003/04, its operating profit was 95.14 billion yen and net profit was 43.84 billion yen.

For the April-September half-year, operating profit grew 13% to 54.22 billion yen as cost cuts and sales growth erased the effect of increased fixed costs and currency-related losses exceeding 10 billion yen, Reuters said. Net profit jumped 14.5% to 28.68 billion yen on a 7.1% rise in sales to 1.163 trillion yen.

Strong automobile sales made up for a fall in profits from its motorcycle business, while North America returned to profit as Suzuki pulled back low-profit sales to fleet customers. Profits also improved in Japan and Asia, the news agency added.