Suzuki sales to grow 10% despite supply issues

Swift and Cultus sales decline in first quarter.

KARACHI:

Suzuki sales are expected to grow by 10 per cent in 2011 despite supply disruption from Japan and relaxation in age limit for used car imports.

Sales will race to 86,000 units in 2011 compared with 78,000 units last year, according to BMA Capital.

Earthquake devastation in Japan has forced the company to curtail production in the ongoing quarter (April to June) by about 16 per cent compared with the previous quarter.

The government last year increased the age-limit for used car imports to five years from three years, bringing more competition in the local automobile market.

The largest automobile assembler, however, witnessed an astounding sales growth of 27 per cent to 23,373 units during January to March compared with industry growth of eight per cent excluding Suzuki in the same period, said BMA Capital analyst Sana Bawani in a research note.

A closer look revealed that sales of Alto, Mehran and Bolan have recorded growth of over 40 per cent year-on-year during January to March while sales of Swift and Cultus declined.

Similarly, the company posted an increase of 18 per cent in sales to 61,693 units during the first nine months of fiscal 2011 against 52,128 cars sold in the corresponding period last year. Strong agricultural income was the key reason behind improvement in sales, the note added.

Market officials informed that unlike Indus Motor, Suzuki has not suspended order booking from its customers, the analyst said. However, supply disruptions could potentially result in extended delivery periods for the customers.

Additionally, lower production level during the period would hurt the company’s production efficiency while lower level of sales would bring down advances received from dealers and customers leaving the company with lower cash balance to be invested. Hence, the company’s other income is likely to fall 16 per cent to Rs486 million in 2011 against last year’s Rs575 million, said Bawani.

Profits to turbo charge
54% in 2011

Production efficiency losses coupled with an impact of rising steel prices, up eight per cent so far this year, are likely to keep Suzuki’s gross margin around 2.5 per cent for the year despite increasing car prices.

However, Suzuki’s net profit is expected to turbo charge 54 per cent to Rs326 million this year compared with Rs212 million posted in 2010, the note said.



Published in The Express Tribune, May 6^th, 2011.