Pak Suzuki profits shot up five times form the millions to billions with the Punjab taxi scheme acting as the turbocharger.
The country’s largest automobile assembler profits grew by 392% to Rs1.37 billion in the first six months of 2012 against Rs279 million reported in the same period last year, according to a notice sent to the Karachi Stock Exchange on Friday.
Completion of the yellow cab scheme and increase in car prices twice (January and April 2012) by 7% to pass on the rupee depreciation helped jack up the profitability, said BMA Capital analyst Zoya Ahmed. The Punjab government allocated Rs4.5 billion in fiscal 2012 (July 2011 to June 2012) budget to provide 20,000 yellow cabs to youth of the province.
Moreover, change in taxation scheme on account of turnover tax adjustment also played its part as the company’s effective tax rate reduced to 26.5% during January to June from 48% in the same period last year, added Ahmed.
The automobile giant sold 61,439 cars in the first half of the year compared with 41,621 units in the same period last year. The two cars selected for the taxi scheme Mehran and Bolan lead the growth.
Mehran – the company’s highest selling car – witnessed an increase of 45% to 18,117 units followed by Bolan registering a 101% increase to 13,692 units.
Liana was the only car of the company that showed a drop in sales by 11% to 251 units.
Lower financial charges by 27% and higher other income by 23% to Rs332 million also contributed in strengthening the bottom-line.
Going forward, Suzuki is expected to see a drop in sales with the completion of the yellow cab scheme coupled with discontinuation of Alto, one of the largest selling cars in fiscal 2012.
The company’s stock went against the trend and rose 3% to close at Rs98.49 during trade at the Karachi Stock Exchange on Friday.
Published in The Express Tribune, August 25th, 2012.
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