AGL 5.95 Decreased By ▼ -0.13 (-2.14%)
ANL 9.26 Decreased By ▼ -0.14 (-1.49%)
AVN 80.82 Decreased By ▼ -0.64 (-0.79%)
BOP 5.20 Decreased By ▼ -0.07 (-1.33%)
CNERGY 4.86 Decreased By ▼ -0.04 (-0.82%)
EFERT 81.82 Increased By ▲ 0.27 (0.33%)
EPCL 53.94 Decreased By ▼ -0.06 (-0.11%)
FCCL 14.29 Decreased By ▼ -0.11 (-0.76%)
FFL 5.93 Decreased By ▼ -0.12 (-1.98%)
FLYNG 7.44 Decreased By ▼ -0.12 (-1.59%)
FNEL 4.95 Decreased By ▼ -0.05 (-1%)
GGGL 9.18 Decreased By ▼ -0.14 (-1.5%)
GGL 16.51 Decreased By ▼ -0.19 (-1.14%)
HUMNL 6.14 Increased By ▲ 0.45 (7.91%)
KEL 2.77 Decreased By ▼ -0.02 (-0.72%)
LOTCHEM 30.81 Increased By ▲ 0.26 (0.85%)
MLCF 27.45 Decreased By ▼ -0.34 (-1.22%)
OGDC 74.27 Increased By ▲ 0.27 (0.36%)
PAEL 15.98 Decreased By ▼ -0.21 (-1.3%)
PIBTL 5.21 Decreased By ▼ -0.02 (-0.38%)
PRL 17.01 Decreased By ▼ -0.28 (-1.62%)
SILK 1.10 Increased By ▲ 0.01 (0.92%)
TELE 10.00 Decreased By ▼ -0.04 (-0.4%)
TPL 7.65 Decreased By ▼ -0.05 (-0.65%)
TPLP 19.41 Decreased By ▼ -0.36 (-1.82%)
TREET 22.72 Decreased By ▼ -0.47 (-2.03%)
TRG 146.80 Decreased By ▼ -0.55 (-0.37%)
UNITY 17.09 Decreased By ▼ -0.10 (-0.58%)
WAVES 10.33 Decreased By ▼ -0.05 (-0.48%)
WTL 1.42 Decreased By ▼ -0.04 (-2.74%)
BR100 4,330 Increased By 3.4 (0.08%)
BR30 16,296 Increased By 46.9 (0.29%)
KSE100 42,904 Increased By 23.3 (0.05%)
KSE30 15,805 Decreased By -4.6 (-0.03%)
Follow us

At a capacity utilization of just over 70 percent, Pakistan Suzuki (PSX: PSMC) has certainly turned a corner in the first half of this year after turning losses for eight consecutive quarters. The poor demand performance for nearly two years was a direct result of the economy in “cool-down” mode with purchasing powers of car buyers diminishing amid increasing cost of borrowing.

This was not the case for other OEMs whose demand began to diminish much after PSMC. Naturally, as a carmaker poised to target middle-income car buyers, the demand for Suzuki cars tends to be very sensitive to changes in income. Couple that with the price effect where automakers almost in unison raised prices across models to keep up with their ballooning costs. All that however is now behind Suzuki as it re-emerges from its past with renewed vigor evidenced by its improving financial standing.

As for the current financial performance, the company sold more than double the vehicles it did during this period last year which translated to an equally positive doubling of revenue. Not including motorcycle sales, the estimated revenue per unit sold grew by 2 percent for Suzuki during 1HCY21. The company’s sales for CBU imported vehicles recorded a decline. Cost per unit sold (estimated) fell by 4 percent despite higher freight and shipping costs due to container shortages, amid the bubbling supply-chain crisis for semi-conductor chips in the global market. This is certainly a feat but improvement in currency certainly played a role here. The margin improvement from negative to 6 percent should be credit to that as well as the company’s higher prices and a favorable sales mix.

Demand has recently improved on the back of reduced cost of car financing which constitute about 40 percent of the company’s sales. This share could grow further over the next quarters if interest rates maintain on that level.

During the period, the company lowered overheads to 4 percent from nearly 6 percent last year which was phenomenal for the bottom-line in conjunction with the reduction in finance costs. In fact, finance costs as a share of revenue fell to less than 1 percent from 7 percent during 1HCY20.

A dominant factor was “other income” that contributed 51 percent to the company’s pre-tax earnings. This is a major component shoring up the bottom-line on other auto OEMs as well which constitutes of prudent investments in risk-free securities and bank deposits. That’s the kind of greasing that Suzuki needed.

Certainly, the company is in recovery mode but not unlike players like Indus Motors, it is also in growth mode indicated by demand being lapped up by prospective car buyers. There are risks—such as government fixing prices amid a rupee depreciation cycle or costs riding up—but if costs of financing stay at their prevailing levels, things are looking up for Suzuki.

Comments

Comments are closed.

Omer Sep 02, 2021 07:52pm
Does Suzuki have semi conductor chips in its cars? What a joke.
thumb_up Recommended (0)

Suzuki: Preparing for the race

Owned by resident Pakistanis: FBR starts taxing hundreds of foreign properties

Overnight reverse repo (ceiling) rate to be 17pc

Turkish cos to take up profit repatriation, taxation issues with PM

Energy sector: ADB sending mission for proposed policy-based loan

Policy rate hiked to 16pc to quell biting inflation

PM, Erdogan hold one-to-one meeting

China’s Shenzhen Energy signs long-term LNG contract with BP

Argentina look to Messi to salvage World Cup bid

Alternative energy: PM urges Pak-Turkish collaboration

Jul-Oct period: Rs241.26bn authorised/disbursed under PSDP