Pak Suzuki announces 207% increase in profit

Earnings amount to Rs5.8b, result below market expectations

KARACHI:

Pak Suzuki Motor Company (PSMC), the country’s largest carmaker in terms of market share, on Tuesday announced a net profit of Rs5.8 billion or earnings per share (EPS) of Rs70.9 in the year ending on December 2015, up 207% compared to Rs1.9 billion or an EPS of Rs23.4 in the same period of last year, according to a company notice sent to the Pakistan Stock Exchange (PSX).

In the fourth quarter (Oct-Dec) of 2015 alone, the company  posted a profit of Rs1.8 billion or an EPS of Rs21.7, up by a massive 479% from Rs311 million or an EPS of Rs3.8 in the same quarter last year.

The result was also accompanied by a final cash dividend of Rs15 per share.

The KSE-100 Index closed at 32,623, down 115 points on Tuesday, while the share price of Pak Suzuki ended at Rs431.33, down 3%.

“The result was below market consensus,” Topline Securities commented in its report.

During 2015, revenues of the company improved substantially by 58% year-on-year (YoY) while gross margins improved by 579 basis points (bps) to 13.6% from 7.8% during 2014.  The company sold 133,660 units in 2015, up 72% YoY.



Revenue grew by 86% year-on-year to amount to Rs23.5 billion in the fourth quarter of fiscal year 2015-16 (4Q2015) as company sold 36,712 units in the fourth quarter (+97% YoY).

“We attribute this increase in volume to the Punjab taxi scheme launched in provincial budget of fiscal year 2015,” the report said. To recall, PSMC offered a discount to the Punjab government after it placed a huge order.

Gross profit improved substantially to Rs3.2 billion (+271% YoY) in 4Q2015 while gross margins rose by 677 bps to 13.6% year on year. This happened due to 22% YoY fall in international steel prices during the fourth quarter of 2015 and favourable exchange rate movement as the dollar and rupee appreciated against Japanese yen by 5.3% YoY and 2.4% YoY, respectively.

Other income grew by 348% YoY to Rs318 million in the fourth quarter of 2015 as the company earned interest on advances received from customers owing to strong car demand.

Distribution expenses surged to Rs445 million (+184% YoY) led by increased sales.

On quarter-on-quarter (QoQ) basis, revenue of the company posted an increase of 11% from Rs21.2 billion in third quarter of fiscal year 2015-16 (3Q2015) due to 8.7% QoQ volumetric growth.

However, gross margins declined by 229 bps from 15.9% in 3Q2015. “We attribute this decline to 1% QoQ appreciation of yen against the dollar and higher sales of taxi units (at discounted price) during the quarter,” said the report.

Published in The Express Tribune, March 16^th, 2016.

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