Corporate results: Pak Suzuki posts below-expectation profit of Rs947.6m

Official blames increased import of used cars for flat earnings

KARACHI: Pak Suzuki - the largest carmaker in Pakistan in terms of market share - has posted a profit of Rs947.6 million in the first quarter of calendar year 2016 (CY16), up just 0.2% compared to Rs946 million in the same period of last fiscal year, according to a company notice sent to Pakistan Stock Exchange (PSX).

Earnings per share (EPS) amounted to Rs11.51 compared to an EPS of Rs11.50 in the period under review.

The result remained below street consensus, owing to low margins in the first quarter, Taurus Securities commented on Thursday.

Citing the reason for the flat profit level, a Pak Suzuki official was quick to blame the import of used cars. “The main reason for below-expected results was the rise in sales of imported used cars that adversely affected sales,” said the official on condition of anonymity.

Agreeing with most analysts, he said that most of the production of vehicles under Punjab taxi scheme was already completed by January 2016, which also contributed to the low production of vehicles in the first quarter.

KSE 100-Index closed at 34,503, up 234 points or 0.68% on Thursday while Pak Suzuki’s share price went down 2.2% to close at Rs392.75. It has already lost over 10% since the government announced the auto policy in March.

Results breakdown

In the first quarter of CY16, revenues declined by 14% quarter-on-quarter, on the back of 18% lower sales to 30,200 after the completion of the Punjab taxi scheme in February 2016.

Furthermore, gross margins also declined by 1.9 percentage points to 11% due to 10% increase in CRC steel and 6% adverse movement in Japanese yen. Thus the bottom-line declined 41% quarter-on-quarter.

On a year-on-year basis, revenue of Pak Suzuki remained stable at Rs20 billion in the first quarter of CY16, up 2% year-on-year, where higher prices were neutralised by 2% lower volumetric sales to 30,200 units.

Moreover, administration cost increased by 64% to Rs442 million, which were compensated by 111% higher other income to Rs279 million.

Pak Suzuki result was below our expectations, said a Topline securities report. Adverse exchange rate movement, implementation of international safety standards, increased age-limit of used imported cars and reduction in import duty are key risks for Pak Suzuki, it added.

Published in The Express Tribune, April 29^th,  2016.

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