Cheap deals for four wheelers are the order of the day and Pakistan Suzuki is cashing in on filling this demand. The companys sales turnover climbed 25 percent against 1QCY10. This tally also represents a 13 percent hike over the previous quarter.
Rising revenues have helped beef up the companys gross profit by a hefty 142 percent over the same period last year.
During the period, the company continued to move away from higher-priced models such as Liana, in favour of more economical rides.
Suzuki Mehran appears to be assuming the role of the companys flagship product as its sales touched 7,493 units in the outgoing quarter after increasing 43 percent, compared to the same period last year.
Sales of Bolan, Alto and Ravi also registered similarly impressive gains over 1QCY10. Commenting on the increase in sales of pickups, a company official cited rising agricultural incomes as a major factor.
Cumulative sales for the outgoing quarter stood at 29,393 units, a marked 27 percent rise over the same period last year.
It is worth mentioning that the local currency has depreciated over 11 percent, while international prices of steel have also surged since last year. Yet, PSMCs gross margins have almost doubled to 2.7 percent in 1QCY11 from 1.4 percent, during the same period last year.
The earnings are nearly three times higher than analysts expectations of Rs34 million and Rs0.41 per share
While the companys sales have posted successive increases in recent months, the relaxation of the car import policy does not bode well for future prospects as older-model imports will put further pressure on price points.
Moreover, increases in sales may be stunted due to lower production during the ongoing quarter. Company officials admit that the recent tsunami in Japan will affect the delivery of parts, although they have not clarified the quantum of this impact on the production of cars for PSMC.
Other income earned on deposits from buyers has also been on the decline. In the outgoing quarter, this head brought in Rs131 million for PSMC, compared to Rs144 million earned in 1QCY10. As delivery times for new cars fall, this income may contract further.
The combined expectations of heightened competition in the future and lower income on deposits took a bite out of investors enthusiasm. Hence it is little wonder that PSMCs share price fell marginally to close at Rs68.36 on Wednesday, despite a result that beat analysts expectations decisively.
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PAK SUZUKI MOTORS
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(Rs mn) 1QCY11 yoy chg qoq chg
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Revenue 12,570 25% 13%
Cost of sales 12,227 24% 10%
Gross profit 343 142% 1805%
Gross margin 2.7% 93% 1588%
Administrative cost 162 14% 0%
Other operating income 132 -9% -1%
PAT 91 NA NA
EPS (Rs) 1.11 NA NA
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Source: KSE notice