Feb. 1 (Bloomberg) -- Suzuki Motor Corp., Japan's largest minicar maker, reported a 5 percent gain in its third-quarter profit after it sold more vehicles and motorcycles.

Net income totaled 17 billion yen ($145 million) in the three months ended Dec. 31, compared with 16.2 billion yen in the year ago period. Sales increased 18 percent to 679.5 billion yen. Third-quarter earnings were derived by subtracting Suzuki's first-half figures from nine-month results published today.

Suzuki, 20 percent owned by General Motors Corp., is expecting a third year of record earnings thanks to rising sales of Swift compact cars, Alto minicars and Grand Vitara sport- utility vehicles. Suzuki, the world's third-largest motorcycle maker, also sold more two-wheeled vehicles in Europe and Asia.

``Demand for small cars like Suzuki's Alto will continue rising especially in emerging markets like India,'' said Makoto Kikuchi, who manages the equivalent of $494 million as chief executive officer at Myojo Asset Management Japan Co. in Tokyo. ``Consumers who are buying their first vehicle in the emerging markets tend to pick a small car that's economical.''

In India, the company's unit, Maruti Udyog Ltd., is increasing sales on higher sales of the Swift and Alto models. Maruti controls half of the country's market.

Shares of Suzuki fell for the first day in five, declining 1.7 percent to 2,350 yen at the 3 p.m. close in Tokyo. The company released its earnings after the market closed.

Unchanged Forecast

Suzuki's operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, gained 5.5 percent to 85.8 billion yen in the three-month period.

In the third quarter, Suzuki's sales of four-wheel vehicles increased 10 percent to 496,000 units, while sales of motorcycles and all-terrain vehicles rose 4.1 percent to 769,000.

The company kept its earnings estimates made in October unchanged. The company forecast net income to rise 0.8 percent to 61 billion yen on sales of 2.57 trillion yen for the year ending March 31. Suzuki's annual profit forecast was based on an exchange rate of 110 yen per dollar and 134 yen per euro.

The maker of Alto minicar is expanding production capacity at factories in Hungary and India to meet local demand. In Japan, sales of Suzuki's minicars rose 6.6 percent to 145,367 in the three months ended Dec. 31, according to the Japan Mini Vehicles Association.

Nine Months

The company said rising sales and cost reductions helped boost its profit 6.8 percent in the nine months ended Dec. 31.

Net income totaled 47.9 billion yen, or 88.04 yen a share, for the nine months ended Dec. 31, compared with 44.8 billion yen, or 81.61 yen a share in the same period a year ago.

Sales rose 12 percent to 1.95 trillion yen. Operating profit rose 5.1 percent to 85.8 billion yen in the nine-month period. The company based its earnings on 112 yen per dollar and 139 yen to the euro in the nine months ended Dec. 31, compared with 108 yen and 135 yen respectively in the same period a year ago.

Cost reductions added 43.6 billion yen to Suzuki's operating profit. A weaker yen against the dollar, euro and other foreign currencies boosted the profit 11.9 billion yen, Suzuki said.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

Last Updated: February 1, 2006 04:23 EST