Suzuki’s net profit races to Rs298m

Pak Suzuki net profit more than quadrupled to Rs298 million during April to June on higher car sales and increase in its prices.

Sales revenue more than doubled to Rs11.9 billion during the second quarter of 2010 compared with Rs5.61 billion, according to data sent to the Karachi Stock Exchange on Monday.

Gross margins improved by 330 percentage points to 4.7 per cent in the second quarter compared with the preceding quarter’s 1.4 per cent on the back of operational efficiencies, according to IGI Securities.

The company posted earnings per share of Rs3.63 during the quarter against last year’s Rs0.84.

However, the bottom line was kept under pressure by a 10 per cent year-on-year appreciation in the value of yen against the rupee and 48 per cent YoY increase in international steel prices, according to BMA Capital analyst Sana Iqbal.

The net profit increased 73 per cent to Rs279 million during the first half of this year against last year’s Rs161 million.

Unit sales for Pak Suzuki Motor Company Limited increased by a phenomenal 126 per cent on yearly basis to 40,318 units during the first half, which helped to double net sales, said senior analyst at IGI Securities, Sana Abdullah, in the company research report.

Net sales of the company stood at Rs21.93 billion in the first half compared with Rs9.75 billion last year, Abdullah added. PSMC sold 40,318 units in the first half compared with sales of 18,035 units in the same period last year.

However, gross margins of the company settled at 3.2 per cent during the first half compared with 3.5 per cent in the corresponding period last year.

Administration and distribution expenses increased by 42 per cent year-on-year due to the launch of the new Suzuki Swift in the period under review, said Abdullah.

Auto sales are expected to remain muted during the second half of the year as the sector’s outlook has been dented considerably in the wake of worst-ever floods in the country’s history leading to a revised agricultural growth target for financial year 2011 from the current 3.8 per cent, hike in the discount rate by 50 basis points in July and anticipation of further tightening ahead.

Reluctance of major banks to resume consumer financing is a major negative for PSMC due to its target market’s reliance on car financing schemes, informed Abdullah.

Moreover, gross margins of the local auto manufacturers are also expected to remain under pressure as the rupee continues to weaken against the yen. The rupee has shed further three per cent during fiscal year 2011 and yen has crossed Re1 in August.

Consumers will have less purchasing power in the second half as inflation picks up, said Iqbal.

Published in The Express Tribune August 24^th, 2010.