Suzuki second quarter profit slides on sluggish car sales, currency woes

FILE PHOTO: The Suzuki logo is seen during the first press day of the Paris auto show, in Paris, France, October 2, 2018. REUTERS/Benoit Tessier

TOKYO (Reuters) – Suzuki Motor Corp <7269.T> reported on Thursday its lowest quarterly operating profit in two years for the July-September period, as vehicle sales eased in China, Europe and India, its biggest market.

Japan’s No. 4 automaker posted a 6.6 percent slide in second quarter operating profit to 82 billion yen ($726 million), its lowest since the December 2016 quarter and below a mean estimate of 93.77 billion yen in a poll of 10 analysts, according to Refinitiv data.

Weakness in emerging market currencies, including the Indian rupee, along with the euro was also a factor, the company said. A depreciating Indian rupee alone knocked 10.5 billion yen from Suzuki’s first-half operating profit.

Despite the quarterly slump, Suzuki raised its forecast for full-year operating profit to 350 billion yen from a previous estimate of 340 billion yen. That assumes the Japanese currency will average around 108 yen , weaker than Suzuki’s previous estimate for 105 yen.

The company also expected an uptick in global car sales to a record 3.34 million units this year, from a previous forecast for around 3.3 million units.

Nevertheless, Suzuki’s latest outlook marked a 6.4 percent slide from last year’s 374.2 billion yen operating profit, a record high.

SOFTER INDIA

High global oil prices, rising interest rates and a weaker rupee in recent months has dented demand for cars in India, the world’s fastest growing auto market, and could put the brakes on sales growth in Suzuki’s biggest market.

Sales in India, where the Swift subcompact and Baleno compact hatchback are among the country’s best-selling cars, eased to 455,000 units in the July-September period from 457,000 a year ago, resulting in essentially flat global sales of 837,000 units.

Suzuki said demand was dented in part by flooding in the Kerala region, a key sales market, during the quarter.

The company said it was unlikely that sales through March in India would recover to the strong levels seen in the first quarter, while rising gasoline prices could pose a risk.

A downturn in India, which accounts for about half of Suzuki’s global annual vehicle sales, could weigh on the automaker’s global target to improve on the record high sales seen last year.

Suzuki accounts for roughly half the passenger vehicles sold in India through a majority stake in the country’s largest automaker, Maruti Suzuki India Ltd .

Suzuki’s overall sales in Asia slipped 2.6 percent during the quarter, largely due to weakness in China.

Suzuki has been retreating from China, the world’s largest auto market, as the automaker struggled in recent years to sell its compact models to a growing middle class that is opting for larger cars.

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