PSMC: Is it excellent all around?
Rising demand for vehicles despite rising fuel costs, has kept Suzuki more than pleased. The local auto giant saw its sales turnover mount six percent in 1HCY11 against 1HCY10. Further, according to Pama, the companys sales jumped eight percent in FY11 over the previous fiscal year. Given that the latter half of FY11 coincides with 1HCY11, this shows that the increase in volumes has also contributed to the growth in revenues The production and sales data released by Pama show that auto sales are up by 4.7 percent from 2009-10 on the backdrop of reduced GST and SED and increased remittances and agricultural incomes. Leading the market with a 53 percent share, Pakistan Suzuki emerged as the biggest beneficiary of these developments. Consumers continued to favour economical models over pricey ones, as sales of Mehran, Alto and Bolan rose by more than 10 percent, as opposed to declining volumetric sales of most other models of the company. This escalating trend in sales of these two models is expected to strengthen as the company projects an increase in sale of 20,000 units under the Government of Punjabs taxi scheme, with an increase of 10,000 units likely to be witnessed in this calendar year. Cost of sales increased by six percent year-on-year in 1HCY11 attributable to a 13 percent year-on-year appreciation of Yen, against the local currency and a 14 percent year-on-year hike in steel prices. Despite that, the company was able to maintain gross margins at a healthy 17 percent in the period under review. Other income earned on installment sales and in the form of markup was brought down by 13 percent to Rs271 million and by 17 percent to Rs139 million in 1HY11 and 2QCY11 respectively over corresponding periods, putting pressure on the companys bottom line. The decrease was due to the drop in income from bank deposits which had depleted because of blockade of funds in withholding tax deducted at customs stage Despite a well-rounded financial performance in the first half, second quarter results remained an area of concern with the top line dipping 10 percent in 2QCY11 over 2QCY10. The management ascribed this to deferral of deliveries in June to take advantage of budgetary measures this fiscal year. Still, the company showed strong resilience by holding up five percent of gross margins in 2QCY11. Even after sustaining previous half-yearly levels, net earnings in 1HCY11 surpassed analysts expectations of Rs241 million by 16 percent. However, quarterly performance of the bottom line was sliced off by 35 percent versus the same period last year. The governments relaxation on commercial import of reconditioned cars will weigh heavily on auto assemblers. Yet, they are optimistic that as time passes, consumers will realise the high cost of maintaining these vehicles and will likely revert to purchasing of locally assembled cars.
Source: KSE notice