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Suzuki Motor profit falls for first time in 8 quarters as tax hike hurts

[TOKYO] Suzuki Motor Corp said on Thursday operating profit fell for the first time in eight quarters in July-September, as sluggish demand in Japan following an April sales tax hike continued to fan fierce, profit-eroding competition.

Operating profit at Japan's fourth-biggest automaker fell 14 per cent to 39.6 billion yen (US$346.55 million) in the second quarter, far short of the 47.1 billion yen mean estimate of 12 analysts polled by Thomson Reuters I/B/E/S, also hit by a tough market in Southeast Asia.

The result was in line with the 40 billion yen profit reported last month by the Nikkei business daily, which cited severe competition particularly in the minivehicle segment, which Suzuki dominates with Daihatsu Motor Co.

Minivehicles, with engine sizes of 660cc, are under consideration in Japan for a tax increase next April. "I can't help but say that the outlook for minivehicles is very bleak," Chief Executive Osamu Suzuki told a news conference.

Suzuki, whose subsidiary Maruti Suzuki India Ltd sells almost every other car in India, kept its typically conservative operating profit guidance at 188 billion yen for the full business year ending March 31.

Maruti Suzuki last week beat analyst estimates with a 29 per cent rise in quarterly net profit, but said growth in car sales would slow in the second half of the year.

In Japan, a sales rush before the tax hike and subsequent demand decline has led to increased competition and prompted Toyota Motor Corp and Honda Motor Co to lower their domestic sales forecasts.

Shares in Suzuki ended down 1.2 per cent before the earnings results, while Tokyo's benchmark Nikkei average lost 0.9 per cent.

REUTERS