Corporate results: Pak Suzuki posts healthier profit

Earns Rs443m in 1QCY14.

KARACHI:

Pakistan Suzuki – the country’s largest carmaker with over 50% market share – has posted earnings of Rs443 million in the first quarter ended March 31, up 22% compared to Rs362 million earned in the same quarter last year.

Earnings per share (EPS) jumped to Rs5.38 in first quarter of calendar year 2014 compared to an EPS of Rs4.40 in the same period of previous year.

The increase in earnings can be attributed to the appreciation of the Pakistani rupee against the Japanese yen that reduced the cost of imported car parts, which improved overall operating margins.

Secondly, the company benefitted as it timely passed through the cost pressures by increasing the car prices, JS Research reported on Thursday. However, the company experienced a 5% year on year decline in car sales volume during the period.

Margin expansion was a key growth driver in 1Q CY14 earnings

The company’s revenues registered a minimal increase of 1% year on year to Rs13.69 billion, against Rs13.60 billion earned during first quarter of 2013 (1QCY13). The marginal increase in revenues was seen because of a hike in car prices by the company from 1QCY13 onwards.

The increase in advertisements and promotional activities resulted in 139% year on year increase in distribution expenses to Rs153 million during the period. Moreover, the company’s finance cost experienced a decline of 92% year on year to Rs3 million because of an absence of exchange losses on the account of rupee/yen depreciation during 1Q CY14.

Analysts say the government is expected to reduce import duty on 700cc or below engine category cars in the upcoming budget, which may affect the growth of Pak Suzuki.

Published in The Express Tribune, May 23^rd, 2014.

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