Suzuki Q4 operating profit down 51%, skips forecasts

Suzuki Q4 operating profit down 51%, skips forecasts

Tokyo: Suzuki Motor Corp posted a 51% drop in quarterly operating profit on Tuesday and, like its peers, did not provide forecasts for the new financial year amid uncertainty over the supply of parts and power.

Like the rest of the industry, Japan’s fourth-largest automaker has been hit by a supply chain disruption since the earthquake and tsunami on 11 March. But its huge exposure to the fast-growing Indian market, where virtually all parts are sourced locally, puts it in a better position than Toyota Motor Corp and Honda Motor Co , analysts said.

Suzuki will operate at about 70% of capacity in Japan this month, compared with about a third for Toyota. Its shares have also held up better than others in the sector, losing 3.9% since the quake against a 9.6% drop for Tokyo’s transport sector subindex .

But chief executive officer Osamu Suzuki said he did not know how much the automaker would be able to produce beyond that.

“We have no outlook for June and beyond," he told a news conference. “(This business year) could be tough."

Suzuki’s operating profit for January-March fell 51% from the same period last year to ¥14.48 billion ($180 million), according to calculations by Reuters. That came short of an average estimate of ¥15.6 billion from 14 analysts who updated their forecasts after the 11 March disaster, according to Thomson Reuters.

Fourth-quarter net profit fell 81% to ¥2.57 billion while revenues fell 1.4% to ¥680.5 billion.

For the new business year that started on April 1, the consensus forecast of 14 analysts has Suzuki’s operating profit falling to ¥81.3 billion from the ¥106.93 billion booked in the year that ended on 31 March.

Fresh worries about power shortages have surfaced this week after Chubu Electric Power said on Monday it would shut down its Hamaoka nuclear power plant in central Japan, at least temporarily, heeding a request by the government, which is worried about a repeat of the disaster at Fukushima Daiichi. Suzuki has all four of its domestic car and motorcycle plants in Chubu Electric’s coverage area, in central Japan.

CEO Suzuki downplayed such concerns, however, saying even at the peak of power demand last year, the utility had been able to provide enough power excluding the output from the Hamaoka plant. He added that as a company and as an individual, he was relieved at the decision to close the plant.

Tetsuro Ii, chief executive officer of Commons Asset Management, agreed that power supply would not be an issue.

“Chubu Electric has enough capacity so (the stoppage of the power plant) should not have a big impact on production," he said.

“Suzuki — and Toyota as well — have taken the stance that they will comply with calls to reduce electricity use, so at this time I think (Chubu Electric) will be able to meet demand."

Suzuki’s main earnings driver continues to be its biggest market, India, where growth in car sales is slowing but still healthy at double-digit%ages.

CEO Suzuki said that with more production capacity coming online soon, Indian unit Maruti Suzuki India would aim to keep up double-digit growth to stay ahead of new entrants such as Toyota and Nissan Motor Co .

He repeated Maruti’s warning last month, however, that demand for cars could be hit by rising interest rates, while higher commodity and energy prices would pressure profits.

Before the results, Suzuki shares closed up 0.2% at yen.