Will PSMCs sales make a U-turn?

The year 2009 didn give small carmakers any reason to smile, no thanks to the declining purchasing power, falling car loans and more importantly, the weakening of the rupee.
The situation was similar for Pakistan Suzuki Motor Company (PSMC) which saw sales volume drop 45 percent to 47,912 units over 2008.
Suzuki Cultus was the worst performer, with 59 percent decline in volumetric sales, while sales of the normally least affected Suzuki Mehran also declined by
36 percent.
Quite naturally, the firms topline fell 34 percent to Rs26 billion. But despite lower volumetric sales, the company managed to maintain its gross profits on the back of higher average sale prices.
PSMC also benefited from lower steel prices during the year. The depreciation of rupee against yen, however, eroded the impact of higher sales prices and lower input cost. As a result, and despite having increased by a good 47 percent, the firms gross margins remained largely unexciting when compared to those achieved by the peers,
The biggest hit, however, was received from the other operating income of company.
PSMC said its other income saw a massive decline stemming from higher base effect in 2008 when the company booked a one-time reversal of Rs464 million attributable to import duty, tax adjustments and advances.
Believing in alls well that ends well, company officials are optimistic about the year 2010 - citing the volumetric growth seen in the second half of 2009. PSMCs sales volume more than doubled to 33836 units in Jun-Dec period, from 18175 units in the first half of CY09.
However, rising commodity prices present a major threat to the company since the companys sales mix is highly tilted towards small end cars whose buyers are very sensitive to price changes.

==================================================

PSMC

==================================================

Rs (mn)                     2009      2008    %chg

==================================================

Turnover                  26,234    39,669    -34%

Cost of sales             25,664    39,081    -34%

Gross profit                 570       588     -3%

Gross margin                2.17%     1.48%    47%

Admin exp                    495       506     -2%

Distribution cost            214       309    -31%

Other operating income       619     1,347    -54%

Finance cost                  12        53    -77%

PAT                          255       624    -59%

==================================================

Source: KSE Announcement