Corporate results: Pak Suzuki posts lower than expected results

Company sales hit by higher costs and depreciating rupee.

KARACHI:

Pak Suzuki Motor Company – the biggest automobile manufacturer by market share in Pakistan – has posted a handsome earning of Rs371 million in the July-September quarter, against a loss of Rs193 million in the corresponding period last year.

The company recorded per share earnings of Rs4.51 in the third quarter of 2013 against a loss per share of Rs2.35 last year.

In comparison to the third quarter of previous year, the company’s gross profit increased significantly to Rs890 million against a negative growth of Rs49 million.



However analysts had projected better results, blaming the jump in taxation costs in the third quarter of 2013 for the lower profits. The taxation cost jumped to Rs191 million from just Rs60 million in the corresponding period last year.

On a nine-month basis, the company reported earnings of Rs1.52 billion, up 29% year on year (YoY) against the first nine month period ending September 30 (9MCY13) earnings of Rs1.17 billion. As a result, earnings per share increased to Rs18.56, compared to Rs14.29 in the previous calendar year.

AKD Research on Wednesday commented that Pak Suzuki’s result was slightly lower than its forecast for 9MCY13 earnings of Rs1.56 billion or per share earnings of Rs19.05.

However, on the volumetric front, Pak Suzuki sold 59,292 cars in 9MCY13 compared to 69,589 in the same period of last year, down by a significant 15% YoY.

“Pak Suzuki will see tough times ahead as its volumetric sales are expected to decline this year compared to the last year. The discontinuation of Punjab governments’ taxi scheme this year will definitely hit the sales of the company,” Summit Capital Analyst Sarfaraz Abbasi told The Express Tribune.

The other reason is the expected increase in cost of production due to strong appreciation of the dollar this year against the Pakistani Rupee, he added.

The decline in car sales of Pak Suzuki can be attributed to the ban on the assembling of CNG kits in new cars and the discontinuation of the Suzuki Alto – a popular 1,000cc car− last year in June 2012. Pak Suzuki desperately wants to import Alto parts from India to resume its Alto series but due to political tensions between the two countries, liberalised trade between the two countries still seems unlikely in the near future.

The government reduced the import age-limit of used cars from five years to three years in December 2012. Since then a gradual decrease in the import of used Japanese cars has been directly assisting the sales of locally assembled cars.

Published in The Express Tribune, October 31^st, 2013.

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