India's Maruti Suzuki quarterly profit jumps 144%

Penny MacRae
Maruti Suzuki Alto cars to be exported out of India are parked at a holding area at the Mundra Port and Special Economic Zone (MPSEZL) on February 19, 2011. India's biggest carmaker Maruti Suzuki reported quarterly profit more than doubled from a year ago, marking the firm's first earnings increase in 18 months as sales surged

India's biggest carmaker Maruti Suzuki on Friday reported quarterly profit more than doubled from a year ago, marking the company's first earnings increase in 18 months as sales surged.

The forecast-beating profit marked a sharp recovery by the company -- 54.2-percent owned by Japanese automaker Suzuki Motor -- from deadly labour unrest last year and a string of work stoppages that badly hit output.

Maruti said profit for the October-December quarter climbed by 144 percent to 5.01 billion rupees ($93 million). Sales leapt 46 percent to 109.6 billion rupees.

"The growth in net profit was primarily due to higher sales and good response to new models," the New Delhi-based company said in a statement, adding tighter cost controls had also helped to drive profit.

Analysts had expected profit to rise to 4.85 billion rupees in the third financial quarter, according to a poll by Dow Jones Newswires.

Maruti, the biggest overseas unit of Suzuki Motor, is vital to the fortunes of its Japanese parent, contributing over half of its net profit, according to the Indian company.

Arun Agarwal, auto analyst at India's Kotak Securities, called the Maruti earnings "strong numbers" and forecast even better times ahead for the carmaker.

Improvement in car demand with interest rates seen falling coupled with a "strong product portfolio is expected to help Maruti post healthy sales volume growth" in the next financial year to March 2014, Agarwal said.

Sales were lifted by a more fuel-efficient model of Maruti's entry-level Alto hatchback, India's biggest-selling car, and its Ertiga minivans, which the firm launched last April -- breaking into the nation's fastest-growing segment.

Maruti's domestic vehicle sales rose 27 percent to 268,957 units in the quarter from a year earlier while export sales climbed 17 percent to 32,496 units.

The results were the latest in a string of better-than-expected performances in the current quarterly earnings season that have propelled the Indian stock market above the key 20,000 level to two-year highs.

Maruti's shares climbed by 4.15 percent to a 52-week high of 1,620 rupees, far outpacing the broader stock market.

Maruti's performance stands out from rivals, whose sales have weakened in the face of consumer reluctance to commit to big-ticket items due to a sharp economic slowdown, costly auto loans and high fuel costs.

The Society of Indian Automobile Manufacturers forecasts domestic car sales growth will be flat for this financial year -- down from 20 percent growth just two years ago.

But it says India, which has drawn a host of global car companies, remains a big market longer-term with just 11 people per 1,000 owning cars -- compared with over 500 per 1,000 in the United States.