Suzuki Motor expects 12.6% decline in operating profit this fiscal

Japanese automobile maker Suzuki Motor Corporation (SMC) on Thursday said it expects a 12.6 per cent decline in operating profit at 170 billion yen for this fiscal due to increase in raw material cost and R&D expenses, besides unclear outlook on the ongoing semiconductor shortage.

Previously, the company did not issue any earnings guidance for the ongoing fiscal as it was "unable to rationally calculate the forecasts owing to the spread of the COVID-19 pandemic in the company's major market of India."

"However, based on the latest situation and the trends in the company's operating results, we have determined the forecasts," SMC said in a statement.

Accordingly, the company said it expects net sales to grow by 7 per cent year on year to 3,400 billion yen in the ongoing fiscal.

SMC further said "as the outlook for semiconductor shortage is unclear, forecasts for the consolidated operating results" for the ongoing fiscal are "based on the assumption that the impact on plant operations would continue until the end of the fiscal year."

"Operating profit is expected to decrease, also due to the increase of raw material cost, and increase of R&D expenses, etc. R&D expenses are expected to increase by 43.8 billion yen to 190 billion yen year-on-year, and we will actively promote research and development, mainly on electrification," it added.

In the April-June 2021 quarter, SMC said its consolidated net sales increased by 420.1 billion yen to 845.4 billion yen compared to the corresponding period of the previous fiscal year, which had been seriously impacted by the coronavirus pandemic.

Operating profit increased by 53.2 billion yen to 54.5 billion yen "owing to increase in sales, especially from sales promotion of inventory models and foreign exchange gains."

The company, however, said it has not reached the pre-COVID levels "mainly owing to reduction of production due to the resurgence of novel coronavirus infections in India and shortage of semiconductors in Japan, increase of raw material cost, and increase of R&D expenses.