Pak Suzuki Motor reports highest quarterly loss

Pak Suzuki Motor Company (PSMC) reported its highest-ever quarterly loss of Rs12.9 billion for the first three months of 2023 in a filing to the Pakistan Stock Exchange (PSX).

The significant loss came as a result of lower sales and higher finance cost.

The automaker’s revenue for the quarter stood at Rs21.84 billion, marking a sharp decrease of 54% compared to Rs47.74 billion recorded in the same period of last year.

Additionally, the revenue dived 64% on a quarter-on-quarter (QoQ) basis, driven by a 74% year-on-year (YoY) and 70% QoQ fall in unit sales.

“The decline in revenue is mainly attributable to lower volumetric sales, down by 74% year-on-year,” said Asad Ali, an auto analyst at Insight Research.

Topline Securities, in its note, stated that the company’s financial performance fell short of industry expectations due to higher-than-expected finance cost.

PSMC’s finance cost, which includes exchange loss, mark-up on late delivery, demurrage and detention charges, surged 12 times YoY and three times QoQ to Rs12.8 billion in Q1 of 2023.

Pakistani rupee depreciated by over 20% against the US dollar during the same period, while inflation averaged at over 31%, adding to the challenges faced by PSMC and the overall auto sector.

Gross margins for the company arrived at 9.1% in Q1, slightly lower than the previous quarter’s 9.8%, despite a hike in car prices.

However, the gross margins were better YoY. According to Asad Ali, the company’s gross margins were 2.8% in the same period of last year, “possibly due to increase in car prices, lower freight charges and significant cost-cutting measures.”

Distribution and marketing expenses increased by 20% YoY but fell by 18% QoQ to Rs878 million, in line with the decline in volumetric sales and higher inflation.

PSMC’s other income showed a sharp drop of 86% YoY and 87% QoQ to Rs74 million in the first quarter.

It reported loss per share (LPS) of nearly Rs157 for the first quarter of 2023, compared to LPS of Rs5.6 in Q1 of 2022 and LPS of Rs47 in Q4 of 2022.

Pak Suzuki recorded tax expenses of Rs274 million in the first quarter of 2023 against tax credit of Rs188 million in Q1 of 2022.

In recent months, the auto industry, which is heavily dependent on imports, has been adversely affected by the government’s decision to curb imports and restrict the opening of Letters of Credit.

Additionally, higher finance costs and a massive increase in car prices have also resulted in reduced demand from consumers. According to data shared by the Pakistan Automotive Manufacturers Association (Pama), car sales in March 2023 stood at 9,211 units, reflecting a 62% increase on a month-on-month basis but significantly lower by 66% compared to the same period in 2022.

Published in The Express Tribune, April 19^th, 2023.

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