Suzuki faced some sharp turns in 2011 but handled them with perfection as profits more than tripled to Rs794 million.
The country’s largest automobile assembler was forced to jack up prices by 8% in the year, enough to keep the sales going and protect them from strong cost pressures amid steel prices jumping 2% and the rupee depreciated by 9% against the Japanese Yuan. Exchange rate is a key determinant of profits for the automobile industry as parts are imported from Japan and then assembled in the country.
Total sales, another factor of the speedy growth, rose massively by 17% to 92,339 with Bolan and Mehran leading the way. The two witnessed an extra demand on account of a taxi scheme launched by Punjab government aimed to deliver 7,500 cabs to successful applicants in 2011.
Swift sales also more than doubled to 3,247 units in the period under review. Cumulative sales of the three cars contributed around 55% share in total volumetric sales, said Summit Capital analyst Sarfraz Abbasi.
Hence, net sales rose 24% to Rs52.72 billion in 2011 against sales of Rs42.64 billion, according to a notice sent to the Karachi Stock Exchange.
The board of directors in its meeting held on Monday also announced a final cash dividend of Rs2 per ordinary share of Rs10.
Similarly, cost of sales also showed a huge upsurge of 22% primarily because of the currency depreciation. If the rupee declines by 1% its puts an additional burden of around 2.39% on the cost of sales, according to Summit Capital estimates.
The company paid tax at an effective tax rate of 42% in 2011 against 68% a year ago. The road ahead for the company is bumpy as an unstable macro economic outlook of the country which might result in further depreciation of the rupee and also because of the lower production because of the ban on the use of CNG kits, said Abbasi.
Sales are expected to drop 20% in 2012 as company’s sales are driven by Mehran, Bolan, Alto and Swift and ban on CNG kits would hamper sales of these segments.
Published in The Express Tribune, March 20th, 2012.
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