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Maruti Q2 profit slides 37%

Posted by Yogesh on Friday, 24 October, 2008

NEW DELHI: Maruti Suzuki India reported a 37 percent slide in quarterly profit Friday as costly borrowing and higher raw material prices put the brakes on earnings.

Net profit for the second quarter to September slumped to 2.9 billion rupees (59 million dollars) from 4.67 billion in the same period last year, said Maruti, 54.2 percent owned by Japan’s Suzuki Motor Corp.

To counter the slowdown in Asia’s fourth-largest automobile market, the company said it was “laying special focus on growing customer segments, including corporates, rural households and government employees.”

Maruti, which holds over 50 percent of India’s car market, was also increasing “its focus on its cost reduction programs within the company as well as with business associates,” the New Delhi-based company said in a statement.

The profit tumble was mainly due to higher borrowing costs, a rise in material costs, the impact of currency changes and higher provisions for depreciation due to new strict rules adopted by the company, the company said.

However, “despite the tough macroeconomic situation” premium models like the DZire sedan “continue to show strong sales,” the company said.

Sales rose 6.1 percent to 48.06 billion during the second quarter from 45.3 billion over the same period last year.

The slowing profits reflected a downturn in car demand in India which has been hit by interest rates at seven-year highs. In September, car sales in India rose by just 2.8 percent to 108,823 from a year earlier — a far cry from double digit growth in previous years.

The Indian auto market is expected to expand by around 10 percent this year.

Car penetration is just seven per 1,000 people compared to 550 per 1,000 in countries such as Germany.

India’s automotive industry, which produces around 1.5 million vehicles annually, is worth 34 billion dollars a year and accounts for five percent of India’s gross domestic product. Source The Economic Times

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