Maruti Suzuki profit beats forecast

Mumbai: Maruti Suzuki India Ltd, India's biggest carmaker, reported profit that beat analysts' estimates as a revival in demand in Asia's third-biggest automobile market led to record sales.

Fourth-quarter net income at Suzuki Motor Corp's Indian unit declined 3 per cent to Rs6.4 billion (Dh448 million) from Rs6.6 billion a year earlier, the New Delhi-based company said in a statement Friday. That exceeded the Rs5.56 billion median of 43 analysts' estimates compiled by Bloomberg.

Chief Executive Officer Shinzo Nakanishi is adding new models and expanding diesel engine capacity as demand shifts to cars that run on the fuel, which is cheaper than petrol in India.

The automaker, which introduced its Ertiga van this month, may earn higher margins from the vehicle as it shares a platform and components with Swift and Dzire models, according to Umesh Karne, an analyst at Brics Securities Ltd in Mumbai.

"Record sales are propelling profit at Maruti as demand increases for higher margin products such as the Swift and also more expensive diesel models," said Karne.

"We see a slow and steady increase in demand as interest rates come down and consumer sentiment improves."

Median

Sales rose 17 per cent to Rs114.9 billion, according to the statement.

That compares with the Rs118.1 billion median of 43 analysts' estimates compiled by Bloomberg.

Raw material costs increased 18 per cent to Rs88.7 billion, according to the statement. The automaker, 54 per cent owned by Suzuki Motor, sold more than 100,000 units in each month of the quarter, with sales reaching a record in March, Maruti said April 2.

Industrywide car sales rose to records in January, February and March, after sales had declined 2.3 per cent in the nine months ended in December from a year earlier, according to the Society of Indian Automobile Manufacturers. Maruti's sales in the nine-month period declined 17 per cent because a labour dispute at its Manesar factory resulted in an output loss.

Interest rate

The central bank cut its key interest rate this month for the first time since 2009, seeking to bolster an economy the government estimates expanded 6.9 per cent in the 12 months through March, the least in three years. The end of government controls sent petrol prices to a record, prompting more car buyers to opt for vehicles that run on diesel.

India's fuel pricing policy has widened the gap between diesel and petrol prices to 60 per cent from 28 per cent in June 2010.

India subsidises diesel, which is used by freight companies and accounts for a higher weight in the inflation index.