Marking the half-year milestone with a stellar financial performance, Pak Suzuki is on a high like never before. Keeping abreast with the local automobile industry which signed off on an impressive 22 percent year-on-year growth, PSMC has maintained its position as the leader of the pack, reporting a spectacular bottom line of Rs1.3 billion at the end of 2QFY12.
The bottom line growth comes off the back of incremental improvements in top line revenues, with PSMCs delivery of the last order of cars for the Government of Punjabs taxi scheme being the major growth catalyst.
The firms board of directors on Friday announced the spectacular results, which saw the firms earnings per share climb up to Rs16.64 from Rs3.39 at the close of HY2012, with the increase in demand for fuel-efficient small and mid-sized cars benefitting PSMCs cause. Subsequently, total turnover during the period jumped to nearly Rs17.7 billion, up 63 percent from 2QFY11.
Higher sales volumes coupled with price hikes to pass of rising input costs to customers also translated into a growth in gross profit margins, which stood at 9.6 percent at HY12, compared to 5.2 percent recorded during the last quarter. Moreover, stability in the Pakistani Rupee to Japanese Yen exchange rate also benefitted the firm, which managed to retain its position as the market leader in terms of sales in the local market.
These record profits for PSMC come at a time when the entire industry is faced with critical challenges. With car imports reaching 4,950 units during July alone, industry sales have plunged dangerously, going down 41 percent year-on-year.
And barring the delivery of the last of the 20,000 units ordered by The Bank of Punjab - which supported Mehran and Bolan sales throughout FY12- the last few months have not been kind to PSMC either.
While total car sales for PSMC at the close of FY12 in June stood at 112,157 units, up 40 percent from last year, sales for the firms passenger cars saw a 51 percent month on month decline in July, with sales standing at 5,615 units.
Although declining sales can easily be contributed to the generally subdued consumer interest as a result of pre-buying in anticipation of Euro-II compliance led price hikes it would be unwise to completely buy into all the rosiness that is presented in the firms P/L statement.
A major factor which is likely to trouble the manufacturing giant in the coming months is the forced discontinuation of the Alto, which was a major revenue generator for the firm, especially in the absence of the Diahatsu Coure.
This phasing out comes as a consequence of PSMCs commitment to adopting the Euro-II emission standards and the subsequent decision by Suzukis Japanese parent to move the production facilities of Altos Euro-II compliant parts from Japan to India. Consequently the Pak-India trade ban has lent a major blow to PSMC, and until Islamabad goes ahead with the scheduled liberalisation plans, things are going to remain in limbo on the Alto front.
Overall, while Pak Suzuki still remains stronger than both INDU and Atlas Honda, a close watch on the market for locally assembled vehicles shows generally bad tidings under the current duty/taxation regime which is set to erode the sectors profitability in the coming months.
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PAK SUZUKI MOTOR COMPANY LIMITED
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Rs (mn) HY11 HY12 chg
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Sales 23,251 36,471 57%
Cost of sales 22,427 34,219 53%
Gross profit 824 2,252 173%
Gross profit margin 3.54% 6.17% 74%
Other operating income 271 332 23%
Profit before Taxation 546 1,863 241%
PAT 279 1,369 391%
EPS (Rs) 3.39 16.64 391%
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Source: KSE notice
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