Pak Suzuki profits falls as demand slows down

Vehicle sales drop 33% in six months to June 2013.

KARACHI:

Pak Suzuki Motor Company has announced a decline of 15.4% in its profit that reached Rs1.15 billion in half year ended June 30, 2013 compared to Rs1.36 billion in the corresponding period of previous year.

With the drop in profit, earnings per share fell 16% and reached Rs14.05 against Rs16.61 a year earlier.

Analysts link the decrease in earnings primarily to a 33% fall in vehicle sales by the company. In January-June 2013, Pak Suzuki sold 41,326 vehicles, sharply lower than 61,439 units sold in the first half of last year.

Sales dropped following the end of Punjab taxi scheme and halt to production of Suzuki Alto in the middle of 2012. As a result, the company’s topline slid 26% to Rs26.9 billion in first half of 2013 against Rs36.5 billion a year earlier.

Analysts say inability of domestic car assemblers to launch economy cars of 1,000cc or below engine capacity has been a drag on their performance over the past 12 months. This has provided room to imported cars, especially smaller ones, to gain ground in the local market.

However, Pak Suzuki’s profit in the second quarter (April to June) surged 119% to Rs433 million compared to the first quarter.

Research house Topline Securities said in its report on Monday the company’s inability to timely pass on rising cost pressures resulted in deteriorating gross margins to 5.9%, down by 31 basis points from the previous six-month period.

However, support to profit came from a one-time gain through sale of an old motorcycle plant in Karachi (Rs3.3 per share in 2Q13) which caused other income to rise 70% to Rs564 million.

Though sales declined 4%,  gross margin in the second quarter stood at 7% compared to 4.7% in the previous quarter.

Published in The Express Tribune, August 20^th, 2013.

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