Pak Suzuki’s six-month profit up 39%, stands at Rs1.99b

EPS increases to Rs24.20 in Jan-Jun, earnings short of expectations

KARACHI: Pak Suzuki Motor Company - the largest carmaker in Pakistan - posted a net profit of Rs1.99 billion in the first half (January-June) of calendar year 2017, up 39% compared to Rs1.43 billion in the same period of the previous year, according to a company notice sent to the Pakistan Stock Exchange (PSX).

Earnings per share (EPS) rose to Rs24.20 from an EPS of Rs17.44 in the period under review. Second quarter (April-June) earnings of the company stood at Rs685 million, up 40% compared to Rs488 million in the same period of the previous year. “Pak Suzuki Motor (PSMC) earnings fell short of our expectations mainly due to lower margins,” Topline Securities report said on Tuesday.

PSMC stock closed 0.60% lower at Rs646.74 on the PSX. The benchmark KSE 100-share Index closed the day 388 points or 0.85% up at 45,917.

PSMC’s higher volumes were supported by sales of ‘Wagon-R’ and ‘new Cultus’ (introduced in April 2017). In totality, the company sold 29,301 units during second quarter of 2017 (2Q2017), up by 8% year-on-year, followed by 13% increase in prices.

The company has raised the prices of ‘Wagon-R’ (VXL Variant) by Rs196,000 to Rs1,250,000. Also, in terms of volumetric growth, ‘Suzuki Wagon-R’ remained the most impressive variant with volumes reaching 5,076 units in 2Q2017, up 78% year-on-year.

On a year-on-year basis, gross margins declined marginally to 8% during 2Q2017. Decline in margins can be attributed to around 3% year-on-year appreciation of Japanese Yen against the green back and 11% increase in steel prices. On a sequential basis, net revenues declined by 4% in 2Q2017. Earnings on a quarter-on-quarter basis fell primarily on the back of four percentage points decline in gross margins.

The report said that lower margins were due to 54% quarter-on-quarter increase in steel prices and lower sale of high margin ‘Swift’ product, down 17% quarter-on-quarter.

Unfavourable movement in exchange rate (specifically rupee/yen parity) and commodity prices, regulatory changes, which can allow import of used cars, increased competition from existing and new players are the key risks for the firm, the report added.

Published in The Express Tribune, July 26^th, 2017.

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