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Business News/ Home-page / Maruti Q3 profit falls 54.3%, lags forecast
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Maruti Q3 profit falls 54.3%, lags forecast

Maruti Q3 profit falls 54.3%, lags forecast

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Mumbai: Maruti Suzuki India Ltd, the country’s largest car maker, missed forecasts with a 54.3% fall in quarterly profit as high material costs and adverse currency changes in a sluggish market squeezed margins.

Vehicle makers in India face daunting task as a slowing economy crimps consumer spending, although a drop in commodity prices such as steel should help Maruti bring down costs in the coming quarters.

Maruti’s shares rebounded more than 6% after falling initially as the sharper drop in earnings was partly caused by higher depreciation, while a cut in state-set fuel prices on Wednesday could help demand, analysts said.

“On the operating front the results were not bad. If you take the additional provisioning and add that, the results will be in line with expectations," said Surjit Arora, analyst with Prabhudas Lilladher.

“There are also other factors such as the fuel price cuts and the effect of commodity prices coming down all of which are creating an optimism," he said.

New Delhi-based Maruti, which holds almost half the Indian car market with models such as the best-selling Alto and Swift hatchbacks, raised the prices of some models on Tuesday to cover increased input costs and foreign currency changes.

Japan’s Toyota Motor Corp, Honda Motor Co and Nissan Motor Co have all said they would delay expanding capacity in India, partly to conserve cash in a declining global car market.

Toyota said last month it would shrink planned output capacity at its next factory in India due to start production in 2010.

Maruti, 54.2% owned by Japan’s Suzuki Motor Corp, also faces competition from the Indian unit of Hyundai Motors with its i10 and recently launched i20 hatchback.

Net profit fell to Rs214 crore ($43.8 million) in its fiscal third quarter ended December from Rs467 crore in the same period a year earlier. Net sales fell to Rs4,626 crore from Rs4,674 crore.

That compared with a net profit forecast of Rs248 crore on net sales of Rs4322 crore in a Reuters poll.

Vehicle sales fell to 173,494 units in the December quarter, down 14% from a year earlier. Maruti has been trying to shift consumers to premium models such as the DZire and SX4 sedans.

Maruti has so far resisted production cuts even as other vehicle makers reduced output to prevent inventory build-up.

Shares in Maruti, valued at $3.2 billion, were trading up 3.2% at Rs537.35 by 2.56 pm.

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Published: 29 Jan 2009, 03:44 PM IST
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