Pakistan Suzuki Motor Companys first-half revenue more than doubled from a year earlier, as the carmaker benefited from the improvement in consumer confidence amid modest economic growth that boosted the demand for cars.
On the back of better agricultural income, growth in remittances, improvements in manufacturing data and a low base effect, the countrys biggest automaker saw a complete turnaround in demand, as it posted a healthy rise in sales volumes to 40,318 cars during the period against 17,564 in the same period a year earlier.
In growth terms, Suzuki Ravi was the best performer, with a 134 percent surge in volumetric sales; while sales of Liana witnessed tepid recovery as its sales increased to 492 units against 282 units compared to the same period a year earlier.
Woefully, massive growth in revenue didn translate into healthy gross margins as waning purchasing power of the rupee, inflationary pressures and higher commodity prices continued to put pressure on the firms production cost. However, the company managed to keep its gross profit margin intact at 3 percent.
While the companys cumulative administration and distribution cost as a percentage of sales fell to 2 percent from 3 percent in the same period a year earlier, it wasn enough to save its net margins.
PSMCs net profit margin fell to 1.3 percent against 1.7 percent in the same period a year earlier, though in absolute terms its bottom-line grew to Rs279 million from Rs161 million in the same period a year earlier.
Though, the firm is still in the black, a further rise in yen and inflation could eat its profits in the future.
Moreover, the demand outlook for cars is also vulnerable to rising commodity prices, since the companys sales mix is highly tilted towards small end cars, where buyers are highly sensitive to price changes. And heavy floods in the country would result in lower agriculture income and in turn dampen the demand for cars.
To top it all off, these days automakers are also at the mercy of the upcoming trade policy. If the government further relaxes the used car import policy, the influx of cheap cars in the market will cloud the local industrys outlook. In other words, tough luck for auto dealers.
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PSMC
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Rs (mn) 1HCY10 1HCY09 %chg
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Turnover 21,930 9,748 125%
Cost of sales 21,226 9,409 126%
Gross profit 704 339 108%
Gross margin 3.2% 3.5% n.a.
Admin exp 316 226 40%
Distribution exp 125 85 47%
Other operating income 312 281 11%
Net profit 279 161 73%
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Source: KSE Announcement
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