Maruti Suzuki Q1 profit up

July 23, 2009
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, MUMBAI, Jul 23 – India\’s largest car maker Maruti Suzuki India said Thursday that first-quarter net profit jumped 25 percent, beating market forecasts, as domestic and export demand for its new cars surged.

Maruti, majority owned by Japan\’s Suzuki Motor Corp, reported net profit of 5.83 billion rupees (120 million dollars) in the three months to June 30.

The profit rise was the first in six quarters. Analysts had expected the company to post a profit of around 4.5 billion dollars.

Revenue rose 34 percent to 63.4 billion rupees as vehicle sales climbed nearly 18 percent to 226,729 units.

Maruti\’s shares closed up 78.4 rupees or 6.44 percent at 1,295.55 on the Mumbai stock exchange, led by the strong earnings.

"The company achieved strong volume growth in the domestic as well as export markets," Maruti said in a statement, attributing its success to "new models and continued focus on tapping new market segments."

Profit growth was also helped by an easing of commodity prices, a sales mix highlighting higher-end models and favourable foreign exchange rates, the company added.

Maruti commands the lion\’s share of India\’s car market although its dominance has been reduced with the entry of global car giants in the past decade.

In recent months, India\’s car makers have seen demand for vehicles pick up on lower interest rates and stimulus packages from the government aimed at reviving an industry hit by the global downturn.

Maruti said domestic sales volumes grew 9.6 percent to 197,415 vehicles, led by the newly launched A-star and Ritz and Alto, Swift, Swift Dzire and WagonR models.

For the quarter, exports surged 134 percent to 29,314 vehicles from a year earlier.

Incentives offered by European governments to scrap old cars helped to fuel export sales growth, the company said.

"The earnings are very good, beating market expectations. Exports have supported revenue growth," said Vaishali Jajoo, an analyst at Angel Broking.

"Operating margins also improved as raw material costs declined," she said.

Maruti\’s operating profit margin jumped to 15.5 percent in the June-end quarter from 8.6 percent in the March quarter.

"The worst appears to be over… for India\’s passenger car makers. Their challenge will now be to manage costs" as raw material prices rise, said Mahantesh Sabarad, an analyst at Centrum Broking.

Angel\’s Jajoo forecast that India\’s passenger car segment could log domestic growth of five to six percent for the year, but overseas sales could rise by as much as 50 percent in the same period.

Sabarad said he also expected domestic commercial vehicles sales, which have lagged in recent months, to pick up in July.

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