Pak Suzuki posts staggering losses of Rs6.3b

Reports additional outstanding foreign liabilities of $184m as of December 31

KARACHI:

Pak Suzuki Motor Company (PSMC) has reported a significant loss of Rs6.3 billion, with outstanding foreign liabilities of $184 million, for the year ended December 31, 2022.

According to a notice sent to the Pakistan Stock Exchange (PSX) on Monday, “The company has outstanding foreign liabilities equivalent to $184 million at year end December 31, 2022, which increased to equivalent $218 million subsequent to the year end.”

Speaking to The Express Tribune, Arif Habib Limited (AHL) Head of Research Tahir Abbas explained that, “These are dollar-denominated liabilities that keep growing with the dollar appreciating against the rupee.”

In just one year, the rupee has depreciated against the dollar by around 65% from around Rs175 to about Rs280 to a dollar. “Companies procure their raw material from foreign countries in dollars thus they must pay back in dollars. Due to the country’s situation, however, the company’s liabilities piled up,” said Abbas.

“Up to December 31, 2022, the company incurred an exchange loss of Rs3.55 billion on foreign currency transactions and balances,” said Pak Suzuki, adding that, “After the year end, the rupee to dollar parity has further deteriorated and resulted in a massive unrealised loss of Rs9 billion (approximately) – which may impact the equity of the company in 2023.”

“If the foreign currency liability is not paid due to the restrictions imposed by the State Bank of Pakistan (SBP), the exchange loss of the company would further enhance which will adversely impact the equity of the company in the financial year 2023,” added the statement.

According to a Topline Research report, in its results for the fourth quarter of 2022, the company booked a loss of Rs3.8 billion compared to a profit of Rs489 million in the corresponding period of the previous year. Loss per share (LPS) of the company clocked in at Rs46.5 against earnings per share (EPS) of Rs5.9 in the fourth quarter 2022, taking the full year loss for 2022 to Rs6.3 billion or an LPS of Rs77 per share. “The results came below industry expectations due to higher-than-expected finance costs,” said Sunny Kumar, an Analyst at Topline Research with Insight Research seconding the statement.

“Finance costs, which includes exchange loss, the markup on late delivery, and demurrage and detention charges, were up 14% year-on-year (YoY) and 4% quarter-on-quarter (QoQ) to Rs5.0 billion in the fourth quarter 2022 (4Q2022) and up 16% YoY to Rs11.6 billion in 2022,” said Kumar.

Gross margins for 4Q2022 clocked in at 9.8% higher than the 5.2% reported in the same period last year and also higher than the nine months of 2022 (9M2022) margin of 4.1%. According to Insight Research, gross margins were higher possibly due to an increase in car prices, lower freight charges and significant cost-cutting measures.

“Revenues for the quarter improved by 101% QoQ, led by 91% QoQ growth in unit sales of the company. The YoY growth in revenue is primarily due to an increase in car prices,” said Kumar said.

Distribution and marketing expenses were up 15% YoY and 111% QoQ to Rs1,067 million in 4Q2022 which is in line with the increase in volumetric sales.

With the number of bookings declining, the Other Income of the company also depicted a decrease of 37% YoY and 45% QoQ to Rs583 million in 4Q2022. The company has recorded tax expenses of Rs3.4 billion in 4Q2022 vs tax expenses of Rs221 million in the fourth quarter 2021 and a tax reversal of Rs976 million in 3Q2022.

Published in The Express Tribune, March 21^st, 2023.

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