Suzuki, at the close of the nine-month mark has apparently fared worse than what most analysts were predicting.
While on the whole, the firms performance during the last three quarters still remains within the green zone, -with margins going up to five percent at the close of the nine-month mark- the last quarter has been hard on the local market leader.
During the last three months, PSMCs sales volumes have gone down by 31 percent year-on-year, with cumulative sales during the period totaling 18,134 units, compared to 26,134 units sold in 3QCY11.
Consequently, low sales volumes post-termination of the Government of Punjabs Taxi Scheme have again been the major factor weighing down PSMCs profitability this quarter.
Posting a negative bottom line of Rs193 million for the quarter, the companys P&L also shows significant margin erosions, with the gross margins dragged down by 4.58 percentage points as a result volume declines quarter-on-quarter.
These erosions, despite the fact that the Company has a history of passing off costs onto customers through consistent price hikes and generally stable Rupee-Yen parity within the last three months, should be a point of concern for the firm, which is currently unable to exploit the fact that it has no local competitors for its under 1000-cc car segment.
However, like all other industrial players, PSMC continues to blame the import of refurbished CBUs as the reason of all that goes wrong.
Crying afoul, the local auto industry has been on a roll all year, accusing these imports- quite justifiably- of causing idle production capacity in the local industry.
And they are not far off. Auto figures for September bear testament to the fact, with car sales declining by 9.1 percent MoM, for a volume of 8,481, a record 15-month low.
But an argument in favour of these much maligned imports remains that if nothing else, these cars have vastly improved choice availability for the buyers. Here, it is essential to remember that a general buyer looking for an under 1000-cc car is very likely to be price sensitive.
But on the whole, when buyers are forced to pair up a locally manufactured Mehran- with its low standard aesthetic appeal and an average production quality- against a foreign variant, they are very likely to pay Rs100,000-150,000 more for a visually appealing and smooth driving foreign automobile that boast an exotic name tag.
But industry pressure is insistent. A few days back, leading print publications of the country carried an advertisement by the Indus Motor Company, listing the benefits of buying a brand new car against the purchase of imported used ones.
All marketing puns aside, the visual representation of locally assembled brand new cars with a halo henceforth takes industry lobbying against imported CBUs to a remarkable new high.
On the Suzuki front however, a ray of light at the end of the tunnel remains the prospective growth potential that the company can tap into vis-à-vis the lack of potential completion in the under-1000 cc car segment going forward.
A higher switchover demand to PSMCs Mehran and Cultus is expected to very likely bode well for the Companys gross margins in the future in case a restrictive auto import policy is put into place as a result of persistent industry pressure.
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Pak Suzuki Motor Comapnay Ltd.
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Rs (mn) 3QCY11 3QCY12 % chg
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Net sales 15,298 11,428 -25.3%
Cost of sales 14,663 11,478 -21.7%
Gross profit 635 -49 -107.7%
Gross profit margin 4.15% -0.43% -
Distribution and other selling expenses 48 101 110.4%
Administrative expenses 181 214 18.2%
NPAT 393 -193 -149.1%
Earning per share (Rs) 4.77 -2.35 -
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Source: KSE notice
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