* Net profit 2.27 bln rupees vs 2.52 bln estimates
* Sees sales growth improving in H2 of FY from H1
* Wage settlement to impact margins by 15-30 BPS over 2
* Shares extend gains on better than expected margins
(Adds management comments, background)
By Henry Foy
NEW DELHI, Oct 30 (Reuters) - Maruti Suzuki,
India's biggest carmaker, expects sales growth to accelerate in
the months ahead helped by the launch of new vehicles, after it
posted a fifth straight quarterly profit decline.
Maruti, which until the middle of last year produced every
other car sold in India, is looking to claw back market share
after a deadly riot at one of its plants led to a $250 million
production loss and high interest rates curbed demand.
The company this month launched a cheaper and more
fuel-efficient version of its Alto, the world's best-selling
small car, in time for India's festival season in October and
November, when people typically make big-ticket purchases.
"On account of more festivals in this half, as well as
year-end buying, which a lot of people do, that makes us
confident that the second half will be better," said Maruti's
managing executive director Mayank Pareek.
He was referring to the second half of the current financial
year that ends in March.
High interest rates and fuel prices, and sluggish growth in
Asia's third-largest economy are major concerns for carmakers in
India, with an industry body slashing car sales growth forecast
to just 1 percent to 3 percent in this fiscal year.
Car sales in India grew more than 20 percent in the fiscal
year that ended in March 2011, attracting billions of dollars in
investment from global automakers.
Maruti, controlled by Japan's Suzuki Motor Corp,
said net profit fell to 2.27 billion rupees ($42 million) in the
second quarter of the fiscal year, from 2.4 billion rupees a
Analysts had expected net profit of 2.52 billion rupees,
according to Thomson Reuters I/B/E/S.
Net sales rose 8.5 percent to 80.7 billion rupees, the
company said, helped by its new Ertiga utility vehicle.
Maruti shares extended gains to as much as 4.2 percent after
the earnings as the sales volume and profit margin figures were
better than expected and traders bet on a pick-up in demand in
the months ahead.
The stock ended up 2.1 percent at 1,390.80 rupees, while the
benchmark Mumbai market index fell 1.1 percent.
Brokerge ICICI Direct said Maruti's EBITDA (earnings before
interest, tax, depreciation and amortization) margin at 6.1
percent was better than its expectation of 5.6 percent.
MARGINS UNDER PRESSURE
The July riot at Maruti's Manesar factory that killed one
and injured more than 100 people came after pay negotiations
stalled, according to workers.
In September, the company increased wages at another plant,
in Gurgaon, by around 18,000 rupees per month over three years
and increased the proportion of permanent workers at Manesar.
"Effectively our margins will come down by 15-30 basis
points," as a result of the wage and staffing agreements, said
Chief Financial Officer Ajay Seth, adding that the impact would
be felt over the next two years.
The rupee at the end of September was 12 percent weaker than
12 months previously, shaving 2 percent from Maruti's profit
margins in the quarter as the company imports around 20 percent
of direct and indirect costs and pays royalties to its Japanese
parent.($1 = 53.9950 Indian rupees)
(Writing by Sumeet Chatterjee; Editing by Matt Driskill and