Pak Suzuki swings to profit of Rs1.2b

Turnaround came due to cut in interest rate, economic recovery

KARACHI:

Pak Suzuki Motor Company reported a profit of Rs1.2 billion for the half year ended June 30, 2021 owing primarily to lower financing rates stemming from a reduction in interest rate by the State Bank of Pakistan (SBP).

According to a notice sent to the Pakistan Stock Exchange on Tuesday, the automobile company had reported a loss of Rs2.5 billion in the same period of last year.

During the January-June 2021 period, earnings per share of the car manufacturer came in at Rs14.54 against loss per share of Rs29.92 in the same period of last year.

Net sales of the automaker skyrocketed 141% to Rs66.1 billion in the six-month period under review. The company had recorded sales of Rs27.5 billion in the same period of last year.

In a statement, Arif Habib Limited analyst Arsalan Hanif said that net sales of the company increased due to lower financing rates and revival of economic activity, which aided volumetric growth of 137% year-on-year (50,096 units in 1HCY21 versus 21,116 units in 1HCY20).

“During 1HCY21, gross margins settled at 5.98% compared to negative gross margins of 0.14% in 1HCY20,” he said. “The increase in margins came on account of higher vehicle prices and volumetric growth.”

The company’s distribution expenses soared from Rs564.5 million in first half of 2020 to Rs1.3 billion in the first half of 2021, an increase of 124%.

Similarly, administrative expenses surged 29% to Rs1.3 billion during January-June 2021 against Rs1 billion in January-June 2020.

Other income of the company multiplied more than four times during the half year under review and amounted to Rs866.9 million. The company had recorded receipts of Rs195 million under this head in the same period of last year.

“Other income increased due to exchange gains and cash and bank balances,” said Hanif.

During January-June 2021, finance cost plunged 85% as it fell from Rs1.9 billion in the same period of last year to Rs292.6 million.

“Finance cost of the company dropped owing to a reduction in short-term borrowing and lower interest rates,” the analyst said.

The effective tax rate during 2QCY21 came in at 29% in contrast to 26.6% in 2QCY20, he said.

During the day, the company’s share price fell Rs24.24 and closed at Rs320.96 with 1.02 million shares changing hands at the Pakistan Stock Exchange.

Published in The Express Tribune, September 1^st, 2021.

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