The profit of the Pak Suzuki Motor Company for the year ended December 31, 2003 posted an increase of 85 percent on higher sales after banks and other financial institutions provided funds at cheap rates.
The Pak Suzuki announced financial results on Thursday through a notice faxed to the Karachi Stock Exchange (KSE). Its profit from January to December 2003 amounted to Rs 1.570 billion as compared with Rs 850 million last year.
The sales denoted an increase of 68 percent to Rs 18.484 billion in the period while the company paid a cash dividend of 30 percent or Rs 3 per share for the year, it said.
The high profit resulted from the 68 percent surge in sales volume to 49,465 units as compared with 29,484 units previously, said Sadaf Yousuf, research analyst from Jahagnir Siddiqui Capital Markets.
Other income, predominantly representing income from bank deposits, declined to Rs 182 million on the back of reduction in mark-up rates. Financial charges on the other hand, rose by 77 percent to Rs 215 million as compared with Rs 122 million previously resulting from high mark-up on advances to customers.
She said the Pak Suzuki witnessed a robust trend in its sales volume depicting a 68 percent surge to 49,465 units during 2003 against 29,484 vehicles sold last year.
The overall sales volume of the company's brand, Baleno, surged by approximately 98 percent to 3,452 units while another brand Mehran, constituting bulk of the company's sales witnessed a growth of 92 percent, crossing the 20,000 level mark.
Furthermore, the beginning of the FY2004 financial year also proves beneficial for the company as sales volume during January - February 2004 stood at 9,303 units, depicting a 29 percent YoY upsurge.
Its car demand showed an upsurge resulted from cheaper funding on the back of the softening domestic monetary stance (presently car loans are available at extremely attractive rates averaging between 8-11 percent).
Sadaf said the strong home remittances and consumer preference for new and innovative models have also been major contributors. In our opinion, the above factors are to continue to drive auto sales going forward, she added.
She said the auto sector margins (particularly Japanese manufacturers) are to depict a squeeze on the dual drag of the strong yen and higher raw material prices, adding the prices of major raw materials for auto manufacturers, including steel sheet and coils have sky-rocketed to around Rs 55,000/ton as against approx. Rs 24,000/ton three months earlier.
Recently, the government had decided to allow the conditional import of reconditioned cars coupled with reduction in import duty on the basis of the recommendation of a committee (yet to be set up) to address two major issues, namely the delivery period and the premium on vehicles, she said, adding this possibility created a temporary decline in auto sector scrips.
Nonetheless, recent developments, including a meeting of auto assemblers with the finance minister indicate that no immediate government action is likely. The government's move serves as a threat to the auto manufacturers propelling them to resolve the above-mentioned two issues.
In any case, duty reduction and trade liberalisation cannot be ruled out in the forthcoming Federal Budget, without having a significant impact on the auto sector.
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